(Mark One)
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x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2011
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or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
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For the transition period from
to
.
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NEBRASKA
(State or other jurisdiction of incorporation or organization)
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84-0748903
(I.R.S. Employer Identification No.)
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121 SOUTH 13TH STREET, SUITE 201
LINCOLN, NEBRASKA
(Address of principal executive offices)
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68508
(Zip Code)
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•
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risks related to the Company's student loan portfolio, such as interest rate basis and repricing risk resulting from the fact that the interest rate characteristics of the Company's student loan assets do not match the interest rate characteristics of the funding for those assets, the risk of loss of floor income on certain student loans originated under the Federal Family Education Loan Program (the “FFEL Program” or “FFELP”) of the U.S. Department of Education (the “Department”), risks related to the use of derivatives to manage exposure to interest rate fluctuations, and potential losses from loan defaults, changes in prepayment rates, guaranty rates, loan floor rates, and credit spreads;
|
•
|
risks related to the Company's funding requirements, including the Company's ability to maintain credit facilities or obtain new facilities, the ability of lenders under the Company's credit facilities to fulfill their lending commitments under these facilities, the Company's ability to satisfy debt obligations secured by student loan assets and related collateral, and changes in the general interest rate environment and in the securitization markets for education loans, which may increase the costs or limit the availability of financings necessary to purchase, refinance, or continue to carry education loans;
|
•
|
risks from changes in the student loan and educational credit and services marketplace resulting from the implementation of, or changes in, applicable laws, regulations, and government programs, including the discontinuance of private sector student loan originations under the FFEL Program effective July 1, 2010, and new regulations effective July 1, 2011 that could affect enrollment at for-profit schools, the uncertain nature of the potential impact of the Department's new loan consolidation initiative or similar consolidation programs, and the Company’s ability to maintain or increase volumes under its loan servicing contract with the Department to service federally-owned student loans and to comply with servicing agreements with third-party customers for the service of loans under the Federal Direct Loan and FFEL Programs;
|
•
|
risks from changes in the demand or preferences for educational financing and related services by educational institutions, students, and their families;
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•
|
uncertainties inherent in forecasting future cash flows from student loan assets and related asset-backed securitizations;
|
•
|
risks associated with litigation, complex government regulations, changes in general economic conditions (which have recently led to higher rates of student loan defaults), changes in credit market conditions, and related party transactions; and
|
•
|
uncertainties inherent in the estimates and assumptions about future events that management is required to make in the preparation of the Company's consolidated financial statements.
|
•
|
Students and families
|
•
|
Colleges and universities, specifically financial aid, business, and admissions offices
|
•
|
Private, faith-based, and other K-12 schools
|
•
|
Lenders, servicers, and state agencies in education finance
|
•
|
Government entities
|
(1)
|
Source: Digest of Education Statistics 2010, National Center for Education Statistics, U.S. Department of Education, April 2011, NCES 2011-015
|
•
|
Student Loan and Guaranty Servicing
|
•
|
Referred to as Nelnet Diversified Solutions (“NDS”)
|
•
|
Focuses on student loan servicing, student loan servicing-related technology solutions, and outsourcing services for guaranty agencies
|
•
|
Includes the brands Nelnet Loan Servicing, Firstmark Services, Nelnet Guarantor Solutions, and 5280 Solutions
|
•
|
Tuition Payment Processing and Campus Commerce
|
•
|
Commonly known as Nelnet Business Solutions (“NBS”)
|
•
|
Focuses on tuition payment plans and online payment processing
|
•
|
Includes the brand FACTS Management
|
•
|
Enrollment Services
|
•
|
Commonly called Nelnet Enrollment Solutions (“NES”)
|
•
|
Focuses on education planning and enrollment-related services, including interactive marketing
|
•
|
Includes the brands CUnet, Peterson's, EssayEdge, Sparkroom, and Student Marketing Group
|
•
|
Asset Generation and Management
|
•
|
Includes the acquisition and management of the Company's student loan assets
|
•
|
Servicing FFELP loans (
39%
)
|
•
|
Servicing federally-owned student loans for the Department of Education (
21%
)
|
•
|
Originating and servicing non-federally insured student loans (
4%
)
|
•
|
Servicing and outsourcing services for guaranty agencies (
26%
)
|
•
|
Providing student loan servicing software and other information technology products and services (
10%
)
|
•
|
Three metrics measure the satisfaction among separate customer groups, including borrowers, financial aid personnel at postsecondary schools participating in the federal student loan program, and Federal Student Aid and other federal agency personnel or contractors who work with the servicers.
|
•
|
Two performance metrics measure the success of default prevention efforts as reflected by the percentage of borrowers and percentage of dollars in each servicer's portfolio that go into default.
|
|
Year ended December 31,
|
|||||
|
2011
|
|
2010
|
|||
Fixed rate floor income, gross
|
$
|
164,700
|
|
|
151,861
|
|
Derivative settlements (a)
|
(20,246
|
)
|
|
(19,618
|
)
|
|
Fixed rate floor income, net
|
$
|
144,454
|
|
|
132,243
|
|
|
|
|
|
(a)
|
Includes settlement payments on derivatives used to hedge student loans earning fixed rate floor income
|
•
|
Three metrics measure the satisfaction among separate customer groups, including borrowers, financial aid personnel at postsecondary schools participating in the federal student loan program, and Federal Student Aid and other federal agency personnel or contractors who work with the servicers.
|
•
|
Two performance metrics measure the success of default prevention efforts as reflected by the percentage of borrowers and percentage of dollars in each servicer's portfolio that go into default.
|
•
|
Loan purchases - During
2011
, we purchased
$0.1 million
(par value) of FFELP student loans from Union Bank. No premiums were paid for these loan purchases.
|
•
|
Loan servicing - As of
December 31, 2011
, we serviced
$496.3 million
of loans for Union Bank. Servicing revenue earned by us from this portfolio was
$1.9 million
for the year ended
December 31, 2011
.
|
•
|
Funding - We maintain an agreement with Union Bank, as trustee for various grantor trusts, under which Union Bank has agreed to purchase from us participation interests in student loans (the “FFELP Participation Agreement”). We use this facility as a source to fund FFELP student loans. As of
December 31, 2011
,
$509.2 million
of loans were subject to outstanding participation interests held by Union Bank, as trustee, under this agreement. The agreement automatically renews annually and is terminable by either party upon five business days notice. This agreement provides beneficiaries
|
•
|
Operating cash - The majority of our cash operating bank accounts are maintained at Union Bank. We also invest cash in the Short term Federal Investment Trust (“STFIT”) of the Student Loan Trust Division of Union Bank, which we use as operating cash accounts. As of
December 31, 2011
, we had
$119.5 million
deposited at Union Bank in operating accounts or invested in the STFIT. Interest income earned from cash deposited in these operating cash accounts for the year ended
December 31, 2011
was
$0.2 million
.
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•
|
529 Plan administration - We provide certain 529 Plan administration services to certain college savings plans (the “College Savings Plans”) through a contract with Union Bank, as the program manager. Union Bank is entitled to a fee as program manager pursuant to its program management agreement with the College Savings Plans. In
2011
, we received fees of
$2.3 million
from Union Bank related to our administration services provided to the College Savings Plans.
|
•
|
Lease arrangement - Union Bank leases space in our corporate headquarters building. During
2011
, Union Bank paid us approximately
$73,000
for rent.
|
•
|
Other fees paid to Union Bank - During
2011
, we paid Union Bank approximately
$357,000
for administrative services, commissions, rent expense, and cash management fees.
|
•
|
Other fees received from Union Bank - During
2011
, we received approximately
$169,000
from Union Bank related to an employee sharing arrangement and for providing health and productivity services.
|
•
|
Investment services - In December 2010, Union Bank established various trusts whereby Union Bank serves as trustee for the purpose of purchasing, holding, and selling investments in student loan asset backed securities. Union Bank, in its individual capacity, and us, have both invested money into the trusts. As of
December 31, 2011
, we had
$8.0 million
and Union Bank had $248.5 million, respectively, invested in the trusts.
|
•
|
Defined contribution plan - Union Bank administers our 401(k) defined contribution plan. Fees paid to Union Bank to administer the plan, approximately
$270,000
in
2011
, are paid by the plan's participants.
|
•
|
Letter of credit - Union Bank has issued a
$25,000
letter of credit for our benefit. Union Bank charged no fee for providing this service.
|
Location
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Primary Function or Segment
|
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Approximate square feet
|
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Lease expiration date
|
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Lincoln, NE
|
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Corporate Headquarters, Asset Generation and Management, Student Loan and Guaranty Servicing, Tuition Payment Processing and Campus Commerce, Enrollment Services
|
|
126,000
|
|
|
–
|
|
|
|
|
|
|
|
|
Lincoln, NE
|
|
Student Loan and Guaranty Servicing
|
|
54,000
|
|
|
December 2015
|
|
|
|
|
|
|
|
|
Aurora, CO
|
|
Student Loan and Guaranty Servicing
|
|
96,000
|
|
|
February 2015
|
|
|
|
|
|
|
|
|
Highlands Ranch, CO
|
|
Student Loan and Guaranty Servicing
|
|
84,000
|
|
|
March 2017
|
|
|
|
|
|
|
|
|
Paramus, NJ
|
|
Enrollment Services
|
|
23,000
|
|
|
May 2013
|
|
|
|
|
|
|
|
|
Lawrenceville, NJ
|
|
Enrollment Services
|
|
13,000
|
|
|
December 2012
|
|
2011
|
|
2010
|
||||||||||||||||||||||||||||
|
1st Quarter
|
|
2nd Quarter
|
|
3rd Quarter
|
|
4th Quarter
|
|
1st Quarter
|
|
2nd Quarter
|
|
3rd Quarter
|
|
4th Quarter
|
||||||||||||||||
High
|
$
|
24.00
|
|
|
$
|
23.19
|
|
|
$
|
22.69
|
|
|
$
|
24.65
|
|
|
$
|
19.45
|
|
|
$
|
21.46
|
|
|
$
|
23.98
|
|
|
$
|
24.06
|
|
Low
|
20.87
|
|
|
19.68
|
|
|
17.34
|
|
|
17.75
|
|
|
14.54
|
|
|
17.72
|
|
|
17.76
|
|
|
21.35
|
|
Company/Index
|
12/31/2006
|
|
|
12/31/2007
|
|
|
12/31/2008
|
|
|
12/31/2009
|
|
|
12/31/2010
|
|
|
12/31/2011
|
|
||||||
Nelnet, Inc.
|
$
|
100.00
|
|
|
$
|
47.15
|
|
|
$
|
53.48
|
|
|
$
|
64.57
|
|
|
$
|
91.79
|
|
|
$
|
96.50
|
|
Dow Jones US
|
100.00
|
|
|
106.01
|
|
|
66.61
|
|
|
85.79
|
|
|
100.08
|
|
|
101.42
|
|
||||||
S&P 500
|
100.00
|
|
|
105.49
|
|
|
66.46
|
|
|
84.05
|
|
|
96.71
|
|
|
98.75
|
|
||||||
Dow Jones US Financial Services
|
100.00
|
|
|
83.89
|
|
|
34.86
|
|
|
52.81
|
|
|
54.71
|
|
|
48.35
|
|
||||||
S&P Financials
|
100.00
|
|
|
81.37
|
|
|
36.36
|
|
|
42.62
|
|
|
47.79
|
|
|
39.64
|
|
Period
|
|
Total number of shares purchased (1)
|
|
Average price paid per share
|
|
Total number of shares purchased as part of publicly announced plans or programs (2)
|
|
Maximum number of shares that may yet be purchased under the plans or programs
|
|||||
October 1 - October 31, 2011
|
|
311,524
|
|
|
$
|
19.06
|
|
|
310,547
|
|
|
1,568,860
|
|
November 1 - November 30, 2011
|
|
1,285
|
|
|
21.45
|
|
|
904
|
|
|
1,567,956
|
|
|
December 1 - December 31, 2011
|
|
1,729
|
|
|
23.20
|
|
|
1,392
|
|
|
1,566,564
|
|
|
Total
|
|
314,538
|
|
|
$
|
19.09
|
|
|
312,843
|
|
|
|
|
(1)
|
The total number of shares includes: (i) shares purchased pursuant to the stock repurchase program discussed in footnote (2) below; and (ii) shares owned and tendered by employees to satisfy tax withholding obligations upon the vesting of restricted shares. Shares of Class A common stock purchased pursuant to the stock repurchase program included
247
shares,
904
shares, and
1,392
shares in
October
,
November
, and
December
2011
, respectively, that had been issued to the Company’s 401(k) plan and allocated to employee participant accounts pursuant to the plan’s provisions for Company matching contributions in shares of Company stock, and were purchased by the Company from the plan pursuant to employee participant instructions to dispose of such shares. Shares of Class A common stock tendered by employees to satisfy tax withholding obligations included
977
shares,
381
shares, and
337
shares in
October
,
November
, and
December
2011
, respectively. Unless otherwise indicated, shares owned and tendered by employees to satisfy tax withholding obligations were purchased at the closing price of the Company’s shares on the date of vesting.
|
(2)
|
On May 25, 2006, the Company announced that its Board of Directors authorized a stock repurchase program to repurchase up to a total of five million shares of the Company’s Class A common stock. On February 9, 2007, the Company announced that its Board of Directors increased to ten million the total number of shares of Class A common stock authorized for repurchase under the program. The program currently has an expiration date of May 24, 2012. Certain share repurchases included in the table above were made pursuant to a trading plan adopted by the Company in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934.
|
|
Year ended December 31,
|
||||||||||||||
|
2011
|
|
2010
|
|
2009
|
|
2008
|
|
2007
|
||||||
|
(Dollars in thousands, except share data)
|
||||||||||||||
Operating Data:
|
|
|
|
|
|
|
|
|
|
||||||
Net interest income
|
$
|
364,565
|
|
|
371,071
|
|
|
235,345
|
|
|
187,892
|
|
|
244,614
|
|
Loan and guaranty servicing revenue
|
175,657
|
|
|
158,584
|
|
|
129,911
|
|
|
124,057
|
|
|
150,144
|
|
|
Tuition payment processing and campus commerce revenue
|
67,797
|
|
|
59,824
|
|
|
53,894
|
|
|
48,155
|
|
|
42,766
|
|
|
Enrollment services revenue
|
130,470
|
|
|
139,897
|
|
|
119,397
|
|
|
112,405
|
|
|
103,905
|
|
|
Other income
|
29,513
|
|
|
31,310
|
|
|
26,469
|
|
|
22,775
|
|
|
30,423
|
|
|
Gain (loss) on sale of loans and debt repurchases, net
|
8,340
|
|
|
78,631
|
|
|
76,831
|
|
|
(51,414
|
)
|
|
3,597
|
|
|
Income from continuing operations
|
$
|
204,335
|
|
|
189,034
|
|
|
139,125
|
|
|
26,844
|
|
|
35,429
|
|
Income (expense) from discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
1,818
|
|
|
(2,575
|
)
|
|
Net income
|
$
|
204,335
|
|
|
189,034
|
|
|
139,125
|
|
|
28,662
|
|
|
32,854
|
|
Earnings (loss) per common share
|
|
|
|
|
|
|
|
|
|
||||||
Basic:
|
|
|
|
|
|
|
|
|
|
||||||
Continuing operations
|
$
|
4.24
|
|
|
3.82
|
|
|
2.79
|
|
|
0.54
|
|
|
0.71
|
|
Discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
0.04
|
|
|
(0.05)
|
|
|
Net earnings
|
$
|
4.24
|
|
|
3.82
|
|
|
2.79
|
|
|
0.58
|
|
|
0.66
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
||||||
Continuing operations
|
$
|
4.23
|
|
|
3.81
|
|
|
2.78
|
|
|
0.54
|
|
|
0.71
|
|
Discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
0.04
|
|
|
(0.05)
|
|
|
Net earnings
|
$
|
4.23
|
|
|
3.81
|
|
|
2.78
|
|
|
0.58
|
|
|
0.66
|
|
Dividends per common share
|
$
|
0.37
|
|
|
0.70
|
|
|
0.07
|
|
|
0.07
|
|
|
0.28
|
|
Other Data:
|
|
|
|
|
|
|
|
|
|
||||||
Fixed rate floor income (a)
|
$
|
144,454
|
|
|
132,243
|
|
|
145,098
|
|
|
37,457
|
|
|
10,347
|
|
Core student loan spread
|
1.52
|
%
|
|
1.48
|
%
|
|
1.18
|
%
|
|
0.99
|
%
|
|
1.13
|
%
|
|
Origination and acquisition of student loans
|
$
|
2,841,334
|
|
|
4,202,164
|
|
|
2,779,873
|
|
|
2,809,082
|
|
|
5,152,110
|
|
Student loans serviced (at end of period) (b)
|
76,119,717
|
|
|
61,477,651
|
|
|
37,549,563
|
|
|
35,888,693
|
|
|
33,817,458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
||||||||||||||
|
2011
|
|
2010
|
|
2009
|
|
2008
|
|
2007
|
||||||
|
(Dollars in thousands, except share data)
|
||||||||||||||
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
||||||
Cash and cash equivalents
|
$
|
42,570
|
|
|
283,801
|
|
|
338,181
|
|
|
189,847
|
|
|
111,746
|
|
Student loans receivables, net
|
24,297,876
|
|
|
24,033,001
|
|
|
23,926,957
|
|
|
25,413,008
|
|
|
26,736,122
|
|
|
Goodwill and intangible assets
|
145,492
|
|
|
155,830
|
|
|
197,255
|
|
|
252,232
|
|
|
277,525
|
|
|
Total assets
|
25,852,217
|
|
|
25,893,892
|
|
|
25,876,427
|
|
|
27,854,897
|
|
|
29,162,783
|
|
|
Bonds and notes payable
|
24,434,540
|
|
|
24,672,472
|
|
|
24,805,289
|
|
|
26,787,959
|
|
|
28,115,829
|
|
|
Shareholders' equity
|
1,066,205
|
|
|
906,633
|
|
|
784,563
|
|
|
643,226
|
|
|
608,879
|
|
|
Tangible shareholders' equity
|
920,713
|
|
|
750,803
|
|
|
587,308
|
|
|
390,994
|
|
|
331,354
|
|
|
Book value per common share
|
22.62
|
|
|
18.75
|
|
|
15.73
|
|
|
13.05
|
|
|
12.31
|
|
|
Tangible book value per common share
|
19.53
|
|
|
15.53
|
|
|
11.77
|
|
|
7.93
|
|
|
6.70
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Ratios:
|
|
|
|
|
|
|
|
|
|
||||||
Shareholders' equity to total assets
|
4.12
|
%
|
|
3.50
|
%
|
|
3.03
|
%
|
|
2.31
|
%
|
|
2.09
|
%
|
(a)
|
Includes settlement payments on derivatives used to hedge student loans earning fixed rate floor income.
|
(b)
|
The student loans serviced does not include loans serviced by EDULINX for all periods presented. The Company sold EDULINX in May 2007. As a result of this transaction, EDULINX is reported as discontinued operations.
|
•
|
Reclassifying "software services revenue" to "loan and guaranty servicing revenue."
|
•
|
Reclassifying “professional and other services,” “occupancy and communications,” “postage and distribution,” “advertising and marketing,” and “trustee and other debt related fees” to “other” operating expenses.
|
•
|
Reclassifying student list amortization, which was previously included in “advertising and marketing” to “depreciation and amortization.”
|
•
|
Continue to grow and diversify fee-based revenue
|
•
|
Manage operating costs
|
•
|
Maximize the value of existing portfolio
|
•
|
Use liquidity to capitalize on market opportunities
|
|
Year ended December 31,
|
|||||||||||
|
2011
|
|
2010
|
|
$ Change
|
|
% Change
|
|||||
Student Loan and Guaranty Servicing
|
$
|
175,657
|
|
|
158,838
|
|
|
16,819
|
|
|
10.6
|
%
|
Tuition Payment Processing and Campus Commerce
|
67,797
|
|
|
59,824
|
|
|
7,973
|
|
|
13.3
|
|
|
Enrollment Services (a)
|
130,470
|
|
|
139,897
|
|
|
(9,427
|
)
|
|
(6.7
|
)
|
|
Total revenue from fee-based businesses
|
$
|
373,924
|
|
|
358,559
|
|
|
15,365
|
|
|
4.3
|
%
|
(a)
|
Enrollment services revenue has been negatively affected by the current regulatory uncertainty in the for-profit college industry, which has caused schools to decrease spending on marketing efforts as further discussed in this Item 7 under "Enrollment Services Operating Segment – Results of Operations."
|
Income (loss) before taxes (a)
|
|||||||
($5 million)
|
|
$67 million
|
|
$80 million
|
|
$91 million
|
(a)
|
Excludes restructure, impairment, and litigation charges. Additional information on total operating expenses by segment and these adjustments thereto are further discussed in this Item 7 under "Management's Discussion and Analysis of Financial Condition and Results of Operations."
|
|
Year ended December 31,
|
|||||
|
2011
|
|
2010
|
|||
Fixed rate floor income, gross
|
$
|
164,700
|
|
|
151,861
|
|
Derivative settlements (a)
|
(20,246
|
)
|
|
(19,618
|
)
|
|
Fixed rate floor income, net
|
$
|
144,454
|
|
|
132,243
|
|
Fixed rate floor income contribution to spread, net
|
0.60
|
%
|
|
0.52
|
%
|
(a)
|
Includes settlement payments on derivatives used to hedge student loans earning fixed rate floor income.
|
•
|
FFELP Student Loan Acquisitions
|
-
|
Purchased
$2.8 billion
of FFELP student loans
|
•
|
Acquisitions and Investments in Core Business Areas
|
-
|
Purchased contracts with more than 370 K-12 schools to provide tuition payment plan services
|
•
|
Capital Management
|
-
|
Repurchased
1,436,423
shares of common stock for
$27.1 million
(
$18.89
per share)
|
-
|
Repurchased
$74.8 million
notional amount of debt recognizing a gain of
$7.0 million
|
-
|
Raised the quarterly dividend paid on the Company’s common stock to $0.10 per share (
$17.8 million
in total dividends paid in
2011
)
|
•
|
Loan and guaranty servicing fees
– Loan servicing fees are determined according to individual agreements with customers and are calculated based on the dollar value of loans, number of loans, or number of borrowers serviced for each customer. Guaranty servicing fees, generally, are calculated based on the number of loans serviced, volume of loans serviced, or amounts collected. Revenue is recognized when earned pursuant to applicable agreements, and when ultimate collection is assured.
|
•
|
Software services revenue
– Software services revenue is determined from individual agreements with customers and includes license and maintenance fees associated with student loan software products. Computer and software consulting and remote hosting revenues are recognized over the period in which services are provided to customers.
|
•
|
Interactive marketing
– Interactive marketing revenue is derived primarily from fees which are earned through the delivery of qualified inquiries or clicks. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is reasonably assured. Delivery is deemed to have occurred at the time a qualified inquiry or click is delivered to the customer provided that no significant obligations remain. From time to time, the Company may agree to credit certain inquiries or clicks if they fail to meet the contractual or other guidelines of a particular client. The Company has established a sales reserve based on historical experience. To date, such credits have been immaterial and within management’s expectations.
|
•
|
List marketing
–
Revenue from the sale of lists is generally earned and recognized, net of estimated returns, upon delivery.
|
•
|
Publishing services –
Revenue from the sale of print products is generally earned and recognized, net of estimated returns, upon shipment or delivery.
|
•
|
Resource centers –
Resource centers services include online courses, scholarship search and selection data, career planning, and online information about colleges and universities. The majority of these services are sold based on subscriptions and/or are performance based. Revenues from sales of subscription and performance based services are recognized ratably over the term of the contract as earned. Subscription and performance based revenues received or receivable in advance of the delivery of services is included in deferred revenue.
|
|
Year ended December 31,
|
|
December 31, 2011 vs. 2010 Increase(Decrease)
|
|
December 31, 2010 vs. 2009 Increase(Decrease)
|
||||||||||||||||
|
2011
|
|
2010
|
|
2009
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||
Interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Loan interest
|
$
|
589,686
|
|
|
598,675
|
|
|
609,920
|
|
|
(8,989
|
)
|
|
(1.5
|
)%
|
|
(11,245
|
)
|
|
(1.8
|
)%
|
Investment interest
|
3,168
|
|
|
5,256
|
|
|
10,287
|
|
|
(2,088
|
)
|
|
(39.7
|
)
|
|
(5,031
|
)
|
|
(48.9
|
)
|
|
Total interest income
|
592,854
|
|
|
603,931
|
|
|
620,207
|
|
|
(11,077
|
)
|
|
(1.8
|
)
|
|
(16,276
|
)
|
|
(2.6
|
)
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Interest on bonds and notes payable
|
228,289
|
|
|
232,860
|
|
|
384,862
|
|
|
(4,571
|
)
|
|
(2.0
|
)
|
|
(152,002
|
)
|
|
(39.5
|
)
|
|
Net interest income
|
364,565
|
|
|
371,071
|
|
|
235,345
|
|
|
(6,506
|
)
|
|
(1.8
|
)
|
|
135,726
|
|
|
57.7
|
|
|
Provision for loan losses
|
21,250
|
|
|
22,700
|
|
|
29,000
|
|
|
(1,450
|
)
|
|
(6.4
|
)
|
|
(6,300
|
)
|
|
(21.7
|
)
|
|
Net interest income after provision for loan losses
|
343,315
|
|
|
348,371
|
|
|
206,345
|
|
|
(5,056
|
)
|
|
(1.5
|
)
|
|
142,026
|
|
|
68.8
|
|
|
Derivative settlements, net (a)
|
(7,840
|
)
|
|
(14,264
|
)
|
|
39,286
|
|
|
6,424
|
|
|
(45.0
|
)
|
|
(53,550
|
)
|
|
(136.3
|
)
|
|
Net interest income after provision for loan losses (net of settlements on derivatives)
|
$
|
335,475
|
|
|
334,107
|
|
|
245,631
|
|
|
1,368
|
|
|
0.4
|
%
|
|
88,476
|
|
|
36.0
|
%
|
(a)
|
The Company maintains an overall risk management strategy that incorporates the use of derivative instruments to reduce the economic effect of interest rate volatility. Management has structured the majority of the Company’s derivative transactions with the intent that each is economically effective; however, the Company’s derivative instruments do not qualify for hedge accounting. Derivative settlements for each applicable period should be evaluated with the Company’s net interest income.
|
|
Year ended December 31,
|
|
December 31, 2011 vs. 2010 Increase(Decrease)
|
|
December 31, 2010 vs. 2009 Increase(Decrease)
|
||||||||||||||||
|
2011
|
|
2010
|
|
2009
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||
Variable net interest income, net of settlements on derivatives (a)
|
$
|
218,752
|
|
|
241,199
|
|
|
140,679
|
|
|
(22,447
|
)
|
|
(9.3
|
)%
|
|
100,520
|
|
|
71.5
|
%
|
Fixed rate floor income, net of settlements on derivatives (b)
|
144,454
|
|
|
132,243
|
|
|
145,098
|
|
|
12,211
|
|
|
9.2
|
|
|
(12,855
|
)
|
|
(8.9
|
)
|
|
Variable-rate floor income, net of settlements on derivatives (c)
|
—
|
|
|
—
|
|
|
7,502
|
|
|
—
|
|
|
—
|
|
|
(7,502
|
)
|
|
(100.0
|
)
|
|
Investment interest (d)
|
3,168
|
|
|
5,256
|
|
|
10,287
|
|
|
(2,088
|
)
|
|
(39.7
|
)
|
|
(5,031
|
)
|
|
(48.9
|
)
|
|
Corporate debt interest expense (e)
|
(9,649
|
)
|
|
(21,891
|
)
|
|
(28,935
|
)
|
|
12,242
|
|
|
(55.9
|
)
|
|
7,044
|
|
|
(24.3
|
)
|
|
Provision for loan losses (f)
|
(21,250
|
)
|
|
(22,700
|
)
|
|
(29,000
|
)
|
|
1,450
|
|
|
(6.4
|
)
|
|
6,300
|
|
|
(21.7
|
)
|
|
Net interest income after provision for loan losses (net of settlements on derivatives)
|
$
|
335,475
|
|
|
334,107
|
|
|
245,631
|
|
|
1,368
|
|
|
0.4
|
%
|
|
88,476
|
|
|
36.0
|
%
|
(a)
|
Variable student loan spread is impacted by variable rate student loan interest, consolidation rebate fees, amortization/accretion of loan premiums and discounts, and interest expense on bonds and notes. See Item 7 under "Asset Generation and Management Operating Segment – Results of Operations" for additional information.
|
(b)
|
The Company has a portfolio of student loans that are earning interest at a fixed borrower rate which exceeds the statutorily defined variable lender rate generating fixed rate floor income. See Item 7A, “Quantitative and Qualitative Disclosures about Market Risk – Interest Rate Risk” for additional information.
|
(c)
|
Loans that reset annually on July 1 can generate excess spread income compared with the rate based on the special allowance payment formula in declining interest rate environments. The Company refers to this additional income as variable-rate floor income. A portion of the Company's portfolio was earning variable-rate floor income during 2009 as a result of declining interest rates. No variable-rate floor income was earned during 2011 and 2010.
|
(d)
|
Investment interest decreased year over year due to lower interest rates and a decrease in average cash held.
|
(e)
|
Corporate debt interest expense includes interest expense incurred on the Company's 5.125% Senior Notes due 2010 (the “Senior Notes”), Junior Subordinated Hybrid Securities, and
$750 million
unsecured line of credit.
|
(f)
|
The provision for loan losses represents the periodic expense of maintaining an allowance sufficient to absorb losses inherent in the Company's portfolio of loans. The non-federally insured loan provision decreased $2.8 million and $5.0 million during the years ended December 31, 2011 and 2010, respectively, compared to the same periods in 2010 and 2009. The decrease in 2010 from 2009 is primarily due to a decrease in the dollar amount of the Company's non-federally insured student loan portfolio, including those loans in repayment and loans delinquent, as well as continued aging of the portfolio. The decrease in 2011 from 2010 is primarily due to the continued aging of the portfolio.
|
|
Year ended December 31,
|
|
December 31, 2011 vs. 2010 Increase(Decrease)
|
|
December 31, 2010 vs. 2009 Increase(Decrease)
|
||||||||||||||||
|
2011
|
|
2010
|
|
2009
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||
Loan and guaranty servicing revenue (a)
|
$
|
175,657
|
|
|
158,584
|
|
|
129,911
|
|
|
17,073
|
|
|
10.8
|
%
|
|
28,673
|
|
|
22.1
|
%
|
Tuition payment processing and campus commerce revenue (b)
|
67,797
|
|
|
59,824
|
|
|
53,894
|
|
|
7,973
|
|
|
13.3
|
|
|
5,930
|
|
|
11.0
|
|
|
Enrollment services revenue (c)
|
130,470
|
|
|
139,897
|
|
|
119,397
|
|
|
(9,427
|
)
|
|
(6.7
|
)
|
|
20,500
|
|
|
17.2
|
|
|
Other income (d)
|
29,513
|
|
|
31,310
|
|
|
26,469
|
|
|
(1,797
|
)
|
|
(5.7
|
)
|
|
4,841
|
|
|
18.3
|
|
|
Gain on sale of loans and debt repurchases (e)
|
8,340
|
|
|
78,631
|
|
|
76,831
|
|
|
(70,291
|
)
|
|
(89.4
|
)
|
|
1,800
|
|
|
2.3
|
|
|
Derivative market value and foreign currency adjustments (f)
|
(17,807
|
)
|
|
3,587
|
|
|
(30,802
|
)
|
|
(21,394
|
)
|
|
(596.4
|
)
|
|
34,389
|
|
|
(111.6
|
)
|
|
Derivative settlements, net (g)
|
(7,840
|
)
|
|
(14,264
|
)
|
|
39,286
|
|
|
6,424
|
|
|
(45.0
|
)
|
|
(53,550
|
)
|
|
(136.3
|
)
|
|
Total other income
|
$
|
386,130
|
|
|
457,569
|
|
|
414,986
|
|
|
(71,439
|
)
|
|
(15.6
|
)%
|
|
42,583
|
|
|
10.3
|
%
|
(a)
|
"Loan and guaranty servicing revenue” increased year over year due to an increase in loan servicing revenue from the Department of Education, an increase in guaranty servicing revenue as a result of recognizing revenue related to rehabilitation collections on defaulted loans, and due to the volume added to the the Company's servicing platforms related to the hosted servicing software solution. This additional revenue was partially offset by a decrease in external FFELP servicing revenue due to the loss of servicing volume from third-party customers as a result of these customers selling their portfolios and portfolio runoff. See Item 7 under "Student Loan and Guaranty Servicing Operating Segment – Results of Operations" for additional information.
|
(b)
|
“Tuition payment processing and campus commerce revenue” increased year over year due to an increase in the number of managed tuition payment plans and an increase in campus commerce customers.
|
(c)
|
"Enrollment services revenue" decreased in
2011
compared to
2010
due mainly to a decrease in interactive marketing services volume, as well as decreases in publishing services revenue and resource center and list marketing revenue. Enrollment services revenue has been negatively affected by the current regulatory uncertainty in the for-profit college industry, which has caused schools to decrease spending on marketing efforts.
|
(d)
|
The following table summarizes the components of "other income."
|
|
Year ended December 31,
|
||||||||
|
2011
|
|
2010
|
|
2009
|
||||
Borrower late fee income
|
$
|
12,647
|
|
|
12,390
|
|
|
11,305
|
|
Investment advisory fees (1)
|
5,062
|
|
|
—
|
|
|
—
|
|
|
529 Plan administration fees
|
2,275
|
|
|
5,744
|
|
|
3,409
|
|
|
Other
|
9,529
|
|
|
13,176
|
|
|
11,755
|
|
|
Other income
|
$
|
29,513
|
|
|
31,310
|
|
|
26,469
|
|
(1)
|
Union Bank established various trusts whereby Union Bank serves as trustee for the purpose of purchasing, holding, managing, and selling investments in student loan asset backed securities. During 2011, the Company entered into an agreement to provide various advisory and management services on behalf of Union Bank with respect to investments included in the trusts. The agreement provides that Union Bank will pay to the Company annual fees of 25 basis points on the outstanding balance of the investments in the trusts and 50 percent of the gains from the sale of securities from the trusts. As of December 31, 2011, the outstanding balance of investments in the trusts was $394.2 million.
|
|
Year ended December 31, 2011
|
|
Year ended December 31, 2010
|
|
Year ended December 31, 2009
|
|||||||||||||||||||||||
|
Notional amount
|
|
Purchase price
|
|
Gain
|
|
Notional amount
|
|
Purchase price
|
|
Gain
|
|
Notional amount
|
|
Purchase price
|
|
Gain
|
|||||||||||
Gains on debt repurchases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Junior Subordinated Hybrid Securities
|
$
|
62,558
|
|
|
55,651
|
|
|
6,907
|
|
|
34,995
|
|
|
30,073
|
|
|
4,922
|
|
|
1,750
|
|
|
350
|
|
|
1,400
|
|
|
Asset-backed securities
|
12,254
|
|
|
12,199
|
|
|
55
|
|
|
690,750
|
|
|
650,789
|
|
|
39,961
|
|
|
348,155
|
|
|
319,627
|
|
|
28,528
|
|
||
5.125% Senior Notes due 2010
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
208,284
|
|
|
196,529
|
|
|
11,755
|
|
||
|
$
|
74,812
|
|
|
67,850
|
|
|
6,962
|
|
|
725,745
|
|
|
680,862
|
|
|
44,883
|
|
|
558,189
|
|
|
516,506
|
|
|
41,683
|
|
|
Gain on sale of loans
|
|
|
|
|
1,378
|
|
|
|
|
|
|
33,748
|
|
|
|
|
|
|
35,148
|
|
||||||||
Gain on sale of loans and debt repurchases, net
|
|
|
|
|
$
|
8,340
|
|
|
|
|
|
|
78,631
|
|
|
|
|
|
|
76,831
|
|
(f)
|
The change in “derivative market value and foreign currency adjustments” is the result of the change in the fair value of the Company’s derivative portfolio and transaction gains/losses resulting from the re-measurement of the Company’s Euro-denominated bonds to U.S. dollars. These changes are summarized below.
|
|
Year ended December 31,
|
||||||||
|
2011
|
|
2010
|
|
2009
|
||||
Change in fair value of derivatives - income (expense)
|
$
|
(50,513
|
)
|
|
(77,134
|
)
|
|
6,852
|
|
Foreign currency transaction adjustment - income (expense)
|
32,706
|
|
|
80,721
|
|
|
(37,654
|
)
|
|
Derivative market value and foreign currency adjustments - income (expense)
|
$
|
(17,807
|
)
|
|
3,587
|
|
|
(30,802
|
)
|
(g)
|
The Company maintains an overall risk management strategy that incorporates the use of derivative instruments to reduce the economic effect of interest rate volatility. Management has structured the majority of the Company’s derivative transactions with the intent that each is economically effective; however, the Company’s derivative instruments do not qualify for hedge accounting. Derivative settlements for each applicable period should be evaluated with the Company’s net interest income.
|
|
Year ended December 31,
|
|
December 31, 2011 vs. 2010 Increase(Decrease)
|
|
December 31, 2010 vs. 2009 Increase(Decrease)
|
||||||||||||||||
|
2011
|
|
2010
|
|
2009
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||
Salaries and benefits
|
$
|
177,951
|
|
|
166,011
|
|
|
151,285
|
|
|
11,940
|
|
|
7.2
|
%
|
|
14,726
|
|
|
9.7
|
%
|
Other expenses
|
126,044
|
|
|
138,868
|
|
|
134,597
|
|
|
(12,824
|
)
|
|
(9.2
|
)
|
|
4,271
|
|
|
3.2
|
|
|
Operating expenses, excluding cost to provide enrollment services; impairment, restructure, and litigation charges; and collection costs related to loan rehabilitation revenue
|
303,995
|
|
|
304,879
|
|
|
285,882
|
|
|
(884
|
)
|
|
(0.3
|
)%
|
|
18,997
|
|
|
6.6
|
%
|
|
Cost to provide enrollment services
|
86,548
|
|
|
91,647
|
|
|
74,926
|
|
|
|
|
|
|
|
|
|
|
|
|||
Impairment expense (a)
|
—
|
|
|
26,599
|
|
|
32,728
|
|
|
|
|
|
|
|
|
|
|
|
|||
Restructure expense
|
—
|
|
|
6,020
|
|
|
7,982
|
|
|
|
|
|
|
|
|
|
|||||
Litigation settlement (b)
|
—
|
|
|
55,000
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|||||
Collection costs related to loan rehabilitation revenue (c)
|
17,115
|
|
|
19,341
|
|
|
4,115
|
|
|
|
|
|
|
|
|
|
|||||
Total operating expenses
|
$
|
407,658
|
|
|
503,486
|
|
|
405,633
|
|
|
|
|
|
|
|
|
|
(a)
|
As a result of the 2010 annual goodwill impairment test, the Company recorded impairment charges at two reporting units. These charges consisted of $23.9 million related to its interactive marketing business and $2.7 million related to its list marketing business. As a result of the 2009 annual goodwill impairment test, the Company recorded impairment charges of $32.7 million related to its list marketing business.
|
(b)
|
On August 13, 2010, the Company reached an agreement in principal to pay $55.0 million to settle all claims associated with the "qui tam" action brought by Jon H. Oberg on behalf of the United States of America. The settlement agreement was finalized on October 25, 2010. As a result of the settlement, the Company recorded a $55.0 million pre-tax charge during the third quarter of 2010 and paid the settlement on November 3, 2010.
|
(c)
|
The Company incurred collection costs directly related to revenue earned from rehabilitation loans. These costs are included in "other" under the operating expense section of the consolidated statements of income and are shown separately in the above table for comparability purposes for the periods shown.
|
•
|
An increase in salaries and benefits due to adding resources in preparation to support the hosted servicing software product and to service the growth related to the government servicing contract and the increase in the number of managed tuition payment plans and campus commerce customers.
|
•
|
A decrease in other expenses due primarily to a decrease in legal fees associated with the Oberg litigation which was settled in 2010, as well as a decrease in amortization related to student list costs. The decrease in other expenses was partially offset by an increase in expenses related to the government servicing contract and preparation of support for the hosted servicing software product.
|
•
|
An increase in salaries and benefits as a result of adding resources to service the growth related to the government servicing contract.
|
•
|
An increase in other expenses as a result of incurring additional costs related to the government servicing contract and an increase in legal fees associated with the Oberg litigation in 2010.
|
|
As of December 31, 2011
|
|
As of December 31, 2010
|
|
Change
|
|||||||
|
|
|
Dollars
|
|
Percent
|
|||||||
Assets:
|
|
|
|
|
|
|
|
|||||
Student loans receivable, net
|
$
|
24,297,876
|
|
|
23,948,014
|
|
|
349,862
|
|
|
1.5
|
%
|
Student loans receivable - held for sale
|
—
|
|
|
84,987
|
|
|
(84,987
|
)
|
|
(100.0
|
)
|
|
Cash, cash equivalents, and investments
|
817,481
|
|
|
1,084,322
|
|
|
(266,841
|
)
|
|
(24.6
|
)
|
|
Goodwill
|
117,118
|
|
|
117,118
|
|
|
—
|
|
|
—
|
|
|
Intangible assets, net
|
28,374
|
|
|
38,712
|
|
|
(10,338
|
)
|
|
(26.7
|
)
|
|
Fair value of derivative instruments
|
92,219
|
|
|
118,346
|
|
|
(26,127
|
)
|
|
(22.1
|
)
|
|
Other assets
|
499,149
|
|
|
502,393
|
|
|
(3,244
|
)
|
|
(0.6
|
)
|
|
Total assets
|
$
|
25,852,217
|
|
|
25,893,892
|
|
|
(41,675
|
)
|
|
(0.2
|
)%
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonds and notes payable
|
$
|
24,434,540
|
|
|
24,672,472
|
|
|
(237,932
|
)
|
|
(1.0
|
)%
|
Fair value of derivative instruments
|
43,840
|
|
|
16,089
|
|
|
27,751
|
|
|
172.5
|
|
|
Other liabilities
|
307,632
|
|
|
298,698
|
|
|
8,934
|
|
|
3.0
|
|
|
Total liabilities
|
24,786,012
|
|
|
24,987,259
|
|
|
(201,247
|
)
|
|
(0.8
|
)
|
|
Shareholders' equity
|
1,066,205
|
|
|
906,633
|
|
|
159,572
|
|
|
17.6
|
|
|
Total liabilities and shareholders' equity
|
$
|
25,852,217
|
|
|
25,893,892
|
|
|
(41,675
|
)
|
|
(0.2
|
)%
|
|
Year ended December 31, 2011
|
|||||||||||||||||||||||||||||
|
Fee-Based
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Student
Loan
and
Guaranty
Servicing
|
|
Tuition
Payment
Processing
and
Campus
Commerce
|
|
Enrollment
Services
|
|
Total Fee-
Based
|
|
Asset
Generation and
Management
|
|
Corporate
Activity
and
Overhead
|
|
Eliminations
|
|
Base Net
Income
|
|
Adjustments
to GAAP
Results
|
|
GAAP
Results of
Operations
|
|||||||||||
Total interest income
|
$
|
58
|
|
|
21
|
|
|
—
|
|
|
79
|
|
|
590,736
|
|
|
5,074
|
|
|
(3,035
|
)
|
|
592,854
|
|
|
—
|
|
|
592,854
|
|
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
221,675
|
|
|
9,649
|
|
|
(3,035
|
)
|
|
228,289
|
|
|
—
|
|
|
228,289
|
|
|
Net interest income (loss)
|
58
|
|
|
21
|
|
|
—
|
|
|
79
|
|
|
369,061
|
|
|
(4,575
|
)
|
|
—
|
|
|
364,565
|
|
|
—
|
|
|
364,565
|
|
|
Less provision for loan losses
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21,250
|
|
|
—
|
|
|
—
|
|
|
21,250
|
|
|
—
|
|
|
21,250
|
|
|
Net interest income (loss) after provision for loan losses
|
58
|
|
|
21
|
|
|
—
|
|
|
79
|
|
|
347,811
|
|
|
(4,575
|
)
|
|
—
|
|
|
343,315
|
|
|
—
|
|
|
343,315
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan and guaranty servicing revenue
|
175,657
|
|
|
—
|
|
|
—
|
|
|
175,657
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
175,657
|
|
|
—
|
|
|
175,657
|
|
|
Intersegment servicing revenue
|
69,037
|
|
|
—
|
|
|
—
|
|
|
69,037
|
|
|
—
|
|
|
—
|
|
|
(69,037
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Tuition payment processing and campus commerce revenue
|
—
|
|
|
67,797
|
|
|
—
|
|
|
67,797
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
67,797
|
|
|
—
|
|
|
67,797
|
|
|
Enrollment services revenue
|
—
|
|
|
—
|
|
|
130,470
|
|
|
130,470
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
130,470
|
|
|
—
|
|
|
130,470
|
|
|
Other income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,416
|
|
|
14,097
|
|
|
—
|
|
|
29,513
|
|
|
—
|
|
|
29,513
|
|
|
Gain on sale of loans and debt repurchases
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,433
|
|
|
6,907
|
|
|
—
|
|
|
8,340
|
|
|
—
|
|
|
8,340
|
|
|
Derivative market value and foreign currency adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17,807
|
)
|
|
(17,807
|
)
|
|
Derivative settlements, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,228
|
)
|
|
(612
|
)
|
|
—
|
|
|
(7,840
|
)
|
|
—
|
|
|
(7,840
|
)
|
|
Total other income (expense)
|
244,694
|
|
|
67,797
|
|
|
130,470
|
|
|
442,961
|
|
|
9,621
|
|
|
20,392
|
|
|
(69,037
|
)
|
|
403,937
|
|
|
(17,807
|
)
|
|
386,130
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
102,878
|
|
|
30,070
|
|
|
25,155
|
|
|
158,103
|
|
|
2,791
|
|
|
17,057
|
|
|
—
|
|
|
177,951
|
|
|
—
|
|
|
177,951
|
|
|
Cost to provide enrollment services
|
—
|
|
|
—
|
|
|
86,548
|
|
|
86,548
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
86,548
|
|
|
—
|
|
|
86,548
|
|
|
Depreciation and amortization
|
6,843
|
|
|
1,174
|
|
|
3,204
|
|
|
11,221
|
|
|
—
|
|
|
1,398
|
|
|
—
|
|
|
12,619
|
|
|
17,125
|
|
|
29,744
|
|
|
Other
|
60,442
|
|
|
10,192
|
|
|
9,425
|
|
|
80,059
|
|
|
13,381
|
|
|
19,975
|
|
|
—
|
|
|
113,415
|
|
|
—
|
|
|
113,415
|
|
|
Intersegment expenses, net
|
4,776
|
|
|
4,714
|
|
|
3,521
|
|
|
13,011
|
|
|
70,018
|
|
|
(13,992
|
)
|
|
(69,037
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total operating expenses
|
174,939
|
|
|
46,150
|
|
|
127,853
|
|
|
348,942
|
|
|
86,190
|
|
|
24,438
|
|
|
(69,037
|
)
|
|
390,533
|
|
|
17,125
|
|
|
407,658
|
|
|
Income (loss) before income taxes and corporate overhead allocation
|
69,813
|
|
|
21,668
|
|
|
2,617
|
|
|
94,098
|
|
|
271,242
|
|
|
(8,621
|
)
|
|
—
|
|
|
356,719
|
|
|
(34,932
|
)
|
|
321,787
|
|
|
Corporate overhead allocation
|
(4,138
|
)
|
|
(1,379
|
)
|
|
(1,379
|
)
|
|
(6,896
|
)
|
|
(6,896
|
)
|
|
13,792
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Income (loss) before income taxes
|
65,675
|
|
|
20,289
|
|
|
1,238
|
|
|
87,202
|
|
|
264,346
|
|
|
5,171
|
|
|
—
|
|
|
356,719
|
|
|
(34,932
|
)
|
|
321,787
|
|
|
Income tax (expense) benefit
|
(24,955
|
)
|
|
(7,709
|
)
|
|
(471
|
)
|
|
(33,135
|
)
|
|
(100,451
|
)
|
|
2,860
|
|
|
—
|
|
|
(130,726
|
)
|
|
13,274
|
|
|
(117,452
|
)
|
|
Net income (loss)
|
$
|
40,720
|
|
|
12,580
|
|
|
767
|
|
|
54,067
|
|
|
163,895
|
|
|
8,031
|
|
|
—
|
|
|
225,993
|
|
|
(21,658
|
)
|
|
204,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2010
|
|||||||||||||||||||||||||||||
|
Fee-Based
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Student
Loan
and
Guaranty
Servicing
|
|
Tuition
Payment
Processing
and
Campus
Commerce
|
|
Enrollment
Services
|
|
Total Fee-Based
|
|
Asset
Generation
and
Management
|
|
Corporate
Activity
and
Overhead
|
|
Eliminations
|
|
Base Net
Income
|
|
Adjustments
to GAAP
Results
|
|
GAAP
Results of
Operations
|
|||||||||||
Total interest income
|
$
|
62
|
|
|
32
|
|
|
—
|
|
|
94
|
|
|
600,098
|
|
|
8,109
|
|
|
(4,370
|
)
|
|
603,931
|
|
|
—
|
|
|
603,931
|
|
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
215,339
|
|
|
21,891
|
|
|
(4,370
|
)
|
|
232,860
|
|
|
—
|
|
|
232,860
|
|
|
Net interest income (loss)
|
62
|
|
|
32
|
|
|
—
|
|
|
94
|
|
|
384,759
|
|
|
(13,782
|
)
|
|
—
|
|
|
371,071
|
|
|
—
|
|
|
371,071
|
|
|
Less provision for loan losses
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
22,700
|
|
|
—
|
|
|
—
|
|
|
22,700
|
|
|
—
|
|
|
22,700
|
|
|
Net interest income (loss) after provision for loan losses
|
62
|
|
|
32
|
|
|
—
|
|
|
94
|
|
|
362,059
|
|
|
(13,782
|
)
|
|
—
|
|
|
348,371
|
|
|
—
|
|
|
348,371
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan and guaranty servicing revenue
|
158,838
|
|
|
—
|
|
|
—
|
|
|
158,838
|
|
|
—
|
|
|
(254
|
)
|
|
—
|
|
|
158,584
|
|
|
—
|
|
|
158,584
|
|
|
Intersegment servicing revenue
|
85,342
|
|
|
—
|
|
|
—
|
|
|
85,342
|
|
|
—
|
|
|
|
|
|
(85,342
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Tuition payment processing and campus commerce revenue
|
—
|
|
|
59,824
|
|
|
—
|
|
|
59,824
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
59,824
|
|
|
—
|
|
|
59,824
|
|
|
Enrollment services revenue
|
—
|
|
|
—
|
|
|
139,897
|
|
|
139,897
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
139,897
|
|
|
—
|
|
|
139,897
|
|
|
Other income
|
519
|
|
|
—
|
|
|
—
|
|
|
519
|
|
|
18,639
|
|
|
12,152
|
|
|
—
|
|
|
31,310
|
|
|
—
|
|
|
31,310
|
|
|
Gain on sale of loans and debt repurchases
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
73,709
|
|
|
4,922
|
|
|
—
|
|
|
78,631
|
|
|
—
|
|
|
78,631
|
|
|
Derivative market value and foreign currency adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,587
|
|
|
3,587
|
|
|
Derivative settlements, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13,336
|
)
|
|
(928
|
)
|
|
—
|
|
|
(14,264
|
)
|
|
—
|
|
|
(14,264
|
)
|
|
Total other income (expense)
|
244,699
|
|
|
59,824
|
|
|
139,897
|
|
|
444,420
|
|
|
79,012
|
|
|
15,892
|
|
|
(85,342
|
)
|
|
453,982
|
|
|
3,587
|
|
|
457,569
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
95,293
|
|
|
27,180
|
|
|
24,827
|
|
|
147,300
|
|
|
4,524
|
|
|
15,849
|
|
|
(1,662
|
)
|
|
166,011
|
|
|
—
|
|
|
166,011
|
|
|
Cost to provide enrollment services
|
—
|
|
|
—
|
|
|
91,647
|
|
|
91,647
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
91,647
|
|
|
—
|
|
|
91,647
|
|
|
Depreciation and amortization
|
5,179
|
|
|
1,333
|
|
|
7,359
|
|
|
13,871
|
|
|
3
|
|
|
1,826
|
|
|
—
|
|
|
15,700
|
|
|
22,744
|
|
|
38,444
|
|
|
Impairment expense
|
—
|
|
|
—
|
|
|
26,599
|
|
|
26,599
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
26,599
|
|
|
—
|
|
|
26,599
|
|
|
Restructure expense
|
6,040
|
|
|
—
|
|
|
—
|
|
|
6,040
|
|
|
—
|
|
|
(20
|
)
|
|
—
|
|
|
6,020
|
|
|
—
|
|
|
6,020
|
|
|
Litigation settlement
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
55,000
|
|
|
—
|
|
|
55,000
|
|
|
—
|
|
|
55,000
|
|
|
Other
|
60,061
|
|
|
9,531
|
|
|
10,681
|
|
|
80,273
|
|
|
12,749
|
|
|
26,743
|
|
|
—
|
|
|
119,765
|
|
|
—
|
|
|
119,765
|
|
|
Intersegment expenses, net
|
5,221
|
|
|
3,579
|
|
|
2,461
|
|
|
11,261
|
|
|
85,278
|
|
|
(12,859
|
)
|
|
(83,680
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total operating expenses
|
171,794
|
|
|
41,623
|
|
|
163,574
|
|
|
376,991
|
|
|
102,554
|
|
|
86,539
|
|
|
(85,342
|
)
|
|
480,742
|
|
|
22,744
|
|
|
503,486
|
|
|
Income (loss) before income taxes and corporate overhead allocation
|
72,967
|
|
|
18,233
|
|
|
(23,677
|
)
|
|
67,523
|
|
|
338,517
|
|
|
(84,429
|
)
|
|
—
|
|
|
321,611
|
|
|
(19,157
|
)
|
|
302,454
|
|
|
Corporate overhead allocation
|
(5,856
|
)
|
|
(1,952
|
)
|
|
(1,952
|
)
|
|
(9,760
|
)
|
|
(9,759
|
)
|
|
19,519
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Income (loss) before income taxes
|
67,111
|
|
|
16,281
|
|
|
(25,629
|
)
|
|
57,763
|
|
|
328,758
|
|
|
(64,910
|
)
|
|
—
|
|
|
321,611
|
|
|
(19,157
|
)
|
|
302,454
|
|
|
Income tax (expense) benefit
|
(25,502
|
)
|
|
(6,189
|
)
|
|
9,740
|
|
|
(21,951
|
)
|
|
(124,928
|
)
|
|
26,179
|
|
|
—
|
|
|
(120,700
|
)
|
|
7,280
|
|
|
(113,420
|
)
|
|
Net income (loss)
|
$
|
41,609
|
|
|
10,092
|
|
|
(15,889
|
)
|
|
35,812
|
|
|
203,830
|
|
|
(38,731
|
)
|
|
—
|
|
|
200,911
|
|
|
(11,877
|
)
|
|
189,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Additional information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$
|
41,609
|
|
|
10,092
|
|
|
(15,889
|
)
|
|
35,812
|
|
|
203,830
|
|
|
(38,731
|
)
|
|
—
|
|
|
200,911
|
|
|
|
|
|
||
Plus: Litigation settlement
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
55,000
|
|
|
—
|
|
|
55,000
|
|
|
|
|
|
|||
Plus: Restructure expense
|
6,040
|
|
|
—
|
|
|
—
|
|
|
6,040
|
|
|
—
|
|
|
(20
|
)
|
|
—
|
|
|
6,020
|
|
|
|
|
|
|||
Plus: Impairment expense
|
—
|
|
|
—
|
|
|
26,599
|
|
|
26,599
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
26,599
|
|
|
|
|
|
|||
Less: Net tax effect
|
(2,295
|
)
|
|
—
|
|
|
(10,108
|
)
|
|
(12,403
|
)
|
|
—
|
|
|
(20,892
|
)
|
|
—
|
|
|
(33,295
|
)
|
|
|
|
|
|||
Net income (loss), excluding litigation settlement, restructure expense, and impairment expense
|
$
|
45,354
|
|
|
10,092
|
|
|
602
|
|
|
56,048
|
|
|
203,830
|
|
|
(4,643
|
)
|
|
—
|
|
|
255,235
|
|
|
|
|
|
|
Year ended December 31, 2009
|
|||||||||||||||||||||||||||||
|
Fee-Based
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Student
Loan
and
Guaranty
Servicing
|
|
Tuition
Payment
Processing
and
Campus
Commerce
|
|
Enrollment
Services
|
|
Total Fee-
Based
|
|
Asset
Generation and
Management
|
|
Corporate
Activity
and
Overhead
|
|
Eliminations
|
|
Base Net
Income
|
|
Adjustments
to GAAP
Results
|
|
GAAP
Results of
Operations
|
|||||||||||
Total interest income
|
$
|
112
|
|
|
62
|
|
|
—
|
|
|
174
|
|
|
609,143
|
|
|
5,391
|
|
|
(2,003
|
)
|
|
612,705
|
|
|
7,502
|
|
|
620,207
|
|
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
357,930
|
|
|
28,935
|
|
|
(2,003
|
)
|
|
384,862
|
|
|
—
|
|
|
384,862
|
|
|
Net interest income (loss)
|
112
|
|
|
62
|
|
|
—
|
|
|
174
|
|
|
251,213
|
|
|
(23,544
|
)
|
|
—
|
|
|
227,843
|
|
|
7,502
|
|
|
235,345
|
|
|
Less provision for loan losses
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29,000
|
|
|
—
|
|
|
—
|
|
|
29,000
|
|
|
—
|
|
|
29,000
|
|
|
Net interest income (loss) after provision for loan losses
|
112
|
|
|
62
|
|
|
—
|
|
|
174
|
|
|
222,213
|
|
|
(23,544
|
)
|
|
—
|
|
|
198,843
|
|
|
7,502
|
|
|
206,345
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan and guaranty servicing revenue
|
131,437
|
|
|
—
|
|
|
—
|
|
|
131,437
|
|
|
—
|
|
|
(1,526
|
)
|
|
—
|
|
|
129,911
|
|
|
—
|
|
|
129,911
|
|
|
Intersegment servicing revenue
|
85,048
|
|
|
—
|
|
|
—
|
|
|
85,048
|
|
|
—
|
|
|
—
|
|
|
(85,048
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Tuition payment processing and campus commerce revenue
|
—
|
|
|
53,894
|
|
|
—
|
|
|
53,894
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
53,894
|
|
|
—
|
|
|
53,894
|
|
|
Enrollment services revenue
|
—
|
|
|
—
|
|
|
119,397
|
|
|
119,397
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
119,397
|
|
|
—
|
|
|
119,397
|
|
|
Other income
|
644
|
|
|
—
|
|
|
—
|
|
|
644
|
|
|
17,169
|
|
|
8,656
|
|
|
—
|
|
|
26,469
|
|
|
—
|
|
|
26,469
|
|
|
Gain on sale of loans and debt repurchases
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
63,676
|
|
|
13,155
|
|
|
—
|
|
|
76,831
|
|
|
—
|
|
|
76,831
|
|
|
Derivative market value and foreign currency adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(30,802
|
)
|
|
(30,802
|
)
|
|
Derivative settlements, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
39,286
|
|
|
—
|
|
|
—
|
|
|
39,286
|
|
|
—
|
|
|
39,286
|
|
|
Total other income (expense)
|
217,129
|
|
|
53,894
|
|
|
119,397
|
|
|
390,420
|
|
|
120,131
|
|
|
20,285
|
|
|
(85,048
|
)
|
|
445,788
|
|
|
(30,802
|
)
|
|
414,986
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
84,405
|
|
|
25,549
|
|
|
23,222
|
|
|
133,176
|
|
|
6,767
|
|
|
16,639
|
|
|
(5,456
|
)
|
|
151,126
|
|
|
159
|
|
|
151,285
|
|
|
Cost to provide enrollment services
|
—
|
|
|
—
|
|
|
74,926
|
|
|
74,926
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
74,926
|
|
|
—
|
|
|
74,926
|
|
|
Depreciation and amortization
|
9,025
|
|
|
1,484
|
|
|
3,959
|
|
|
14,468
|
|
|
9
|
|
|
1,770
|
|
|
—
|
|
|
16,247
|
|
|
22,249
|
|
|
38,496
|
|
|
Impairment expense
|
—
|
|
|
—
|
|
|
32,728
|
|
|
32,728
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
32,728
|
|
|
—
|
|
|
32,728
|
|
|
Restructure expense
|
7,715
|
|
|
—
|
|
|
—
|
|
|
7,715
|
|
|
—
|
|
|
267
|
|
|
—
|
|
|
7,982
|
|
|
—
|
|
|
7,982
|
|
|
Other
|
41,708
|
|
|
8,158
|
|
|
9,267
|
|
|
59,133
|
|
|
19,557
|
|
|
21,526
|
|
|
—
|
|
|
100,216
|
|
|
—
|
|
|
100,216
|
|
|
Intersegment expenses, net
|
4,299
|
|
|
2,563
|
|
|
1,566
|
|
|
8,428
|
|
|
81,335
|
|
|
(10,171
|
)
|
|
(79,592
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total operating expenses
|
147,152
|
|
|
37,754
|
|
|
145,668
|
|
|
330,574
|
|
|
107,668
|
|
|
30,031
|
|
|
(85,048
|
)
|
|
383,225
|
|
|
22,408
|
|
|
405,633
|
|
|
Income (loss) before income taxes and corporate overhead allocation
|
70,089
|
|
|
16,202
|
|
|
(26,271
|
)
|
|
60,020
|
|
|
234,676
|
|
|
(33,290
|
)
|
|
—
|
|
|
261,406
|
|
|
(45,708
|
)
|
|
215,698
|
|
|
Corporate overhead allocation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Income (loss) before income taxes
|
70,089
|
|
|
16,202
|
|
|
(26,271
|
)
|
|
60,020
|
|
|
234,676
|
|
|
(33,290
|
)
|
|
—
|
|
|
261,406
|
|
|
(45,708
|
)
|
|
215,698
|
|
|
Income tax (expense) benefit
|
(26,636
|
)
|
|
(6,156
|
)
|
|
9,984
|
|
|
(22,808
|
)
|
|
(89,178
|
)
|
|
19,186
|
|
|
—
|
|
|
(92,800
|
)
|
|
16,227
|
|
|
(76,573
|
)
|
|
Net income (loss)
|
$
|
43,453
|
|
|
10,046
|
|
|
(16,287
|
)
|
|
37,212
|
|
|
145,498
|
|
|
(14,104
|
)
|
|
—
|
|
|
168,606
|
|
|
(29,481
|
)
|
|
139,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Additional information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss)
|
$
|
43,453
|
|
|
10,046
|
|
|
(16,287
|
)
|
|
37,212
|
|
|
145,498
|
|
|
(14,104
|
)
|
|
—
|
|
|
168,606
|
|
|
|
|
|
||
Plus: Restructure expense
|
7,715
|
|
|
—
|
|
|
—
|
|
|
7,715
|
|
|
—
|
|
|
267
|
|
|
—
|
|
|
7,982
|
|
|
|
|
|
|||
Plus: Impairment expense
|
—
|
|
|
—
|
|
|
32,728
|
|
|
32,728
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
32,728
|
|
|
|
|
|
|||
Less: Net tax effect
|
(2,932
|
)
|
|
—
|
|
|
(12,437
|
)
|
|
(15,369
|
)
|
|
—
|
|
|
917
|
|
|
—
|
|
|
(14,452
|
)
|
|
|
|
|
|||
Net income (loss), excluding restructure and impairment expense
|
$
|
48,236
|
|
|
10,046
|
|
|
4,004
|
|
|
62,286
|
|
|
145,498
|
|
|
(12,920
|
)
|
|
—
|
|
|
194,864
|
|
|
|
|
|
|
Student
Loan
and
Guaranty
Servicing
|
|
Tuition
Payment
Processing
and Campus
Commerce
|
|
Enrollment
Services
|
|
Asset
Generation
and
Management
|
|
Corporate
Activity
and
Overhead
|
|
Total
|
|||||||
|
Year ended December 31, 2011
|
|||||||||||||||||
Derivative market value and foreign currency adjustments
|
$
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,571
|
)
|
|
25,378
|
|
|
17,807
|
|
Amortization of intangible assets
|
8,470
|
|
|
5,005
|
|
|
3,650
|
|
|
—
|
|
|
—
|
|
|
17,125
|
|
|
Compensation related to business combinations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Variable-rate floor income, net of settlements on derivatives
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Net tax effect (a)
|
(3,219
|
)
|
|
(1,902
|
)
|
|
(1,387
|
)
|
|
2,877
|
|
|
(9,643
|
)
|
|
(13,274
|
)
|
|
Total adjustments to GAAP
|
$
|
5,251
|
|
|
3,103
|
|
|
2,263
|
|
|
(4,694
|
)
|
|
15,735
|
|
|
21,658
|
|
|
Year ended December 31, 2010
|
|||||||||||||||||
Derivative market value and foreign currency adjustments
|
$
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,046
|
)
|
|
(541
|
)
|
|
(3,587
|
)
|
Amortization of intangible assets
|
8,576
|
|
|
5,756
|
|
|
8,412
|
|
|
—
|
|
|
—
|
|
|
22,744
|
|
|
Compensation related to business combinations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Variable-rate floor income, net of settlements on derivatives
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Net tax effect (a)
|
(3,259
|
)
|
|
(2,189
|
)
|
|
(3,199
|
)
|
|
1,157
|
|
|
210
|
|
|
(7,280
|
)
|
|
Total adjustments to GAAP
|
$
|
5,317
|
|
|
3,567
|
|
|
5,213
|
|
|
(1,889
|
)
|
|
(331
|
)
|
|
11,877
|
|
|
Year ended December 31, 2009
|
|||||||||||||||||
Derivative market value and foreign currency adjustments
|
$
|
—
|
|
|
—
|
|
|
—
|
|
|
34,569
|
|
|
(3,767
|
)
|
|
30,802
|
|
Amortization of intangible assets
|
4,848
|
|
|
7,440
|
|
|
9,961
|
|
|
—
|
|
|
—
|
|
|
22,249
|
|
|
Compensation related to business combinations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
159
|
|
|
159
|
|
|
Variable-rate floor income, net of settlements on derivatives
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,502
|
)
|
|
—
|
|
|
(7,502
|
)
|
|
Net tax effect (a)
|
(1,842
|
)
|
|
(2,827
|
)
|
|
(3,787
|
)
|
|
(10,285
|
)
|
|
2,514
|
|
|
(16,227
|
)
|
|
Total adjustments to GAAP
|
$
|
3,006
|
|
|
4,613
|
|
|
6,174
|
|
|
16,782
|
|
|
(1,094
|
)
|
|
29,481
|
|
(a)
|
Income taxes are applied based on 38% for the individual operating segments.
|
•
|
Servicing FFELP loans
|
•
|
Originating and servicing non-federally insured student loans
|
•
|
Servicing federally-owned student loans for the Department of Education
|
•
|
Servicing and outsourcing services for guaranty agencies
|
•
|
Providing student loan servicing software and other information technology products and services
|
•
|
Three metrics measure the satisfaction among separate customer groups, including borrowers, financial aid personnel at postsecondary schools participating in the federal student loan programs, and Federal Student Aid and other federal agency personnel or contractors who work with the servicers.
|
•
|
Two performance metrics measure the success of default prevention efforts as reflected by the percentage of borrowers and percentage of dollars in each servicer's portfolio that go into default.
|
•
|
A decrease in FFELP servicing revenue due to the loss of servicing volume from third-party customers.
|
•
|
An increase in government servicing revenue due to increased volume from the Department.
|
•
|
Excluding rehabilitation collections, a decrease in guaranty servicing revenue due to the amortization of the guaranty servicing portfolio.
|
•
|
An increase in software services revenue as a result of the Company beginning to provide hosted student loan servicing to a significant customer in October 2011.
|
•
|
A decrease in operating margin due to the government servicing portfolio growing as a percentage of the Company's total servicing portfolio.
|
•
|
An increase in operating expenses due to incurring additional costs related to the government servicing contract and the hosted servicing software product.
|
Company owned
|
$23,139
|
$24,378
|
$26,351
|
$26,183
|
$23,727
|
$23,249
|
$22,757
|
$22,503
|
$22,650
|
% of Total
|
61.6%
|
56.7%
|
55.3%
|
47.0%
|
38.6%
|
34.2%
|
33.0%
|
30.2%
|
29.8%
|
Number of borrowers:
|
|
|
|
|
|
|
|
|
|
Government servicing:
|
441,913
|
1,055,896
|
1,530,308
|
2,510,630
|
2,804,502
|
2,814,142
|
2,666,183
|
2,966,706
|
3,036,534
|
FFELP servicing:
|
2,311,558
|
2,327,016
|
2,329,150
|
2,227,288
|
1,912,748
|
1,870,538
|
1,837,272
|
1,812,582
|
1,799,484
|
Total:
|
2,753,471
|
3,382,912
|
3,859,458
|
4,737,918
|
4,717,250
|
4,684,680
|
4,503,455
|
4,779,288
|
4,836,018
|
|
Year ended December 31,
|
|
December 31, 2011 vs. 2010 Increase (Decrease)
|
|
December 31, 2010 vs. 2009 Increase (Decrease)
|
||||||||||||||||
|
2011
|
|
2010
|
|
2009
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||
Net interest income
|
$
|
58
|
|
|
62
|
|
|
112
|
|
|
(4
|
)
|
|
(6.5
|
)%
|
|
(50
|
)
|
|
(44.6
|
)%
|
Loan and guaranty servicing revenue
|
175,657
|
|
|
158,838
|
|
|
131,437
|
|
|
16,819
|
|
|
10.6
|
|
|
27,401
|
|
|
20.8
|
|
|
Intersegment servicing revenue
|
69,037
|
|
|
85,342
|
|
|
85,048
|
|
|
(16,305
|
)
|
|
(19.1
|
)
|
|
294
|
|
|
0.3
|
|
|
Other income
|
—
|
|
|
519
|
|
|
644
|
|
|
(519
|
)
|
|
(100.0
|
)
|
|
(125
|
)
|
|
(19.4
|
)
|
|
Total other income
|
244,694
|
|
|
244,699
|
|
|
217,129
|
|
|
(5
|
)
|
|
—
|
|
|
27,570
|
|
|
12.7
|
|
|
Salaries and benefits
|
102,878
|
|
|
95,293
|
|
|
84,405
|
|
|
7,585
|
|
|
8.0
|
|
|
10,888
|
|
|
12.9
|
|
|
Depreciation and amortization
|
6,843
|
|
|
5,179
|
|
|
9,025
|
|
|
1,664
|
|
|
32.1
|
|
|
(3,846
|
)
|
|
(42.6
|
)
|
|
Restructure expense
|
—
|
|
|
6,040
|
|
|
7,715
|
|
|
(6,040
|
)
|
|
(100.0
|
)
|
|
(1,675
|
)
|
|
(21.7
|
)
|
|
Other expenses
|
60,442
|
|
|
60,061
|
|
|
41,708
|
|
|
381
|
|
|
0.6
|
|
|
18,353
|
|
|
44.0
|
|
|
Intersegment expenses, net
|
4,776
|
|
|
5,221
|
|
|
4,299
|
|
|
(445
|
)
|
|
(8.5
|
)
|
|
922
|
|
|
21.4
|
|
|
Total operating expenses
|
174,939
|
|
|
171,794
|
|
|
147,152
|
|
|
3,145
|
|
|
1.8
|
|
|
24,642
|
|
|
16.7
|
|
|
"Base net income" before income taxes and corporate overhead allocation
|
69,813
|
|
|
72,967
|
|
|
70,089
|
|
|
(3,154
|
)
|
|
(4.3
|
)
|
|
2,878
|
|
|
4.1
|
|
|
Corporate overhead allocation
|
(4,138
|
)
|
|
(5,856
|
)
|
|
—
|
|
|
1,718
|
|
|
(29.3
|
)
|
|
(5,856
|
)
|
|
(100.0
|
)
|
|
"Base net income" before income taxes
|
65,675
|
|
|
67,111
|
|
|
70,089
|
|
|
(1,436
|
)
|
|
(2.1
|
)
|
|
(2,978
|
)
|
|
(4.2
|
)
|
|
Income tax expense
|
(24,955
|
)
|
|
(25,502
|
)
|
|
(26,636
|
)
|
|
547
|
|
|
(2.1
|
)
|
|
1,134
|
|
|
(4.3
|
)
|
|
"Base net income"
|
$
|
40,720
|
|
|
41,609
|
|
|
43,453
|
|
|
(889
|
)
|
|
(2.1
|
)%
|
|
(1,844
|
)
|
|
(4.2
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Additional information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
"Base net income"
|
$
|
40,720
|
|
|
41,609
|
|
|
43,453
|
|
|
(889
|
)
|
|
(2.1
|
)%
|
|
(1,844
|
)
|
|
(4.2
|
)%
|
Restructure expense (recovery)
|
—
|
|
|
6,040
|
|
|
7,715
|
|
|
(6,040
|
)
|
|
(100.0
|
)
|
|
(1,675
|
)
|
|
(21.7
|
)
|
|
Net tax effect
|
—
|
|
|
(2,295
|
)
|
|
(2,932
|
)
|
|
2,295
|
|
|
(100.0
|
)
|
|
637
|
|
|
(21.7
|
)
|
|
"Base net income," excluding restructure expense
|
$
|
40,720
|
|
|
45,354
|
|
|
48,236
|
|
|
(4,634
|
)
|
|
(10.2
|
)%
|
|
(2,882
|
)
|
|
(6.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Before Tax Operating Margin, excluding restructure expense and corporate overhead allocation
|
28.5
|
%
|
|
32.3
|
%
|
|
35.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
||||||||||||||||||||||||||
|
2011
|
|
2010
|
|
2009
|
||||||||||||||||||||||
|
Origination
revenue
|
|
Servicing
revenue
|
|
Total
revenue
|
|
Origination
revenue
|
|
Servicing
revenue
|
|
Total
revenue
|
|
Origination
revenue
|
|
Servicing
revenue
|
|
Total
revenue
|
||||||||||
FFELP servicing (a)
|
$
|
—
|
|
|
27,275
|
|
|
27,275
|
|
|
254
|
|
|
36,759
|
|
|
37,013
|
|
|
1,893
|
|
|
57,630
|
|
|
59,523
|
|
Private servicing (b)
|
1,451
|
|
|
8,460
|
|
|
9,911
|
|
|
1,463
|
|
|
7,841
|
|
|
9,304
|
|
|
816
|
|
|
7,454
|
|
|
8,270
|
|
|
Government servicing (c)
|
—
|
|
|
50,978
|
|
|
50,978
|
|
|
—
|
|
|
29,947
|
|
|
29,947
|
|
|
—
|
|
|
1,679
|
|
|
1,679
|
|
|
Guaranty servicing (d)
|
—
|
|
|
64,050
|
|
|
64,050
|
|
|
131
|
|
|
63,495
|
|
|
63,626
|
|
|
307
|
|
|
40,494
|
|
|
40,801
|
|
|
Software services (e)
|
—
|
|
|
23,443
|
|
|
23,443
|
|
|
—
|
|
|
18,948
|
|
|
18,948
|
|
|
—
|
|
|
21,164
|
|
|
21,164
|
|
|
Loan and guaranty servicing revenue
|
$
|
1,451
|
|
|
174,206
|
|
|
175,657
|
|
|
1,848
|
|
|
156,990
|
|
|
158,838
|
|
|
3,016
|
|
|
128,421
|
|
|
131,437
|
|
(a)
|
FFELP servicing revenue decreased in
2011
compared to
2010
due to the loss of servicing volume from third-party customers as a result of these customers selling their portfolios to the Company and/or the Department of Education under a program that offered liquidity to student loan lenders. The decrease is also due to third-party customers' FFELP portfolios decreasing in size due to runoff.
|
(b)
|
Non-federally insured servicing revenue increased during
2011
compared to
2010
due to an overall increase in volume and the addition of a new customer contract.
|
(c)
|
Government servicing revenue increased during
2011
compared to
2010
due to an increase in volume from the Department.
|
(d)
|
Guaranty servicing revenue increased in
2011
compared to
2010
due to additional revenue earned from rehabilitation collections on defaulted loan assets. For the year ended
December 31, 2011
, the Company earned $34.2 million in revenue from rehabilitation collections compared to $33.4 million for the same period in
2010
. Excluding the rehabilitation collection revenue, revenue from guaranty servicing decreased $0.4 million for the year ended
December 31, 2011
compared to the same period in
2010
due to the amortization of the guaranty servicing portfolio.
|
(e)
|
In October 2011, the Company began providing hosted student loan servicing to a significant customer which resulted in an increase of software services revenue compared to the prior year. This increase was offset by a reduction in revenue due to a decease in the number of other products and services provided to external customers as a result of legislative changes in the student loan industry.
|
•
|
Supporting the increase in government servicing volume.
|
•
|
Supporting initiatives to improve performance metrics under the government servicing contract.
|
•
|
Preparing for the additional volume that was added to the Company's servicing platforms in October 2011 related to the hosted servicing software solution.
|
(a)
|
FFELP origination revenue decreased in 2010 compared with 2009 due to legislative changes and market disruptions causing lenders to exit the FFELP marketplace. In addition, effective July 1, 2010, the Reconciliation Act of 2010 prohibits new loan originations under the FFEL Program. FFELP servicing revenue decreased in 2010 due to the loss of servicing volume from third-party customers as a result of these customers selling their portfolios to the Company and/or the Department of Education under a program that offered liquidity to student loan lenders.
|
(b)
|
Non-federally insured servicing revenue increased during 2010 compared to 2009 due to an overall increase in volume and the addition of customer contracts.
|
(c)
|
Government servicing revenue increased during
2010
compared to
2009
due to an increase in volume from the Department.
|
(d)
|
Guaranty servicing revenue increased in 2010 compared to 2009 due to additional revenue earned from rehabilitation collections on defaulted loan assets. For the year ended December 31, 2010, the Company earned $33.4 million in revenue
|
(e)
|
Software services revenue decreased in
2010
compared to
2009
as the result of a reduction in the number of projects for external customers due to the legislative changes in the student loan industry throughout
2009
and
2010
.
|
•
|
An increase in revenue as a result of an increase in the number of managed tuition payment plans and campus commerce customers.
|
•
|
An improved operating margin, which includes strong revenue growth while still incurring expenses related to continued investments in new products and services.
|
|
Year ended December 31,
|
|
December 31, 2011 vs. 2010 Increase (Decrease)
|
|
December 31, 2010 vs. 2009 Increase (Decrease)
|
||||||||||||||||
|
2011
|
|
2010
|
|
2009
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||
Net interest income
|
$
|
21
|
|
|
32
|
|
|
62
|
|
|
(11
|
)
|
|
(34.4
|
)%
|
|
(30
|
)
|
|
(48.4
|
)%
|
Tuition payment processing and campus commerce revenue
|
67,797
|
|
|
59,824
|
|
|
53,894
|
|
|
7,973
|
|
|
13.3
|
|
|
5,930
|
|
|
11.0
|
|
|
Salaries and benefits
|
30,070
|
|
|
27,180
|
|
|
25,549
|
|
|
2,890
|
|
|
10.6
|
|
|
1,631
|
|
|
6.4
|
|
|
Depreciation and amortization
|
1,174
|
|
|
1,333
|
|
|
1,484
|
|
|
(159
|
)
|
|
(11.9
|
)
|
|
(151
|
)
|
|
(10.2
|
)
|
|
Other expenses
|
10,192
|
|
|
9,531
|
|
|
8,158
|
|
|
661
|
|
|
6.9
|
|
|
1,373
|
|
|
16.8
|
|
|
Intersegment expenses, net
|
4,714
|
|
|
3,579
|
|
|
2,563
|
|
|
1,135
|
|
|
31.7
|
|
|
1,016
|
|
|
39.6
|
|
|
Total operating expenses
|
46,150
|
|
|
41,623
|
|
|
37,754
|
|
|
4,527
|
|
|
10.9
|
|
|
3,869
|
|
|
10.2
|
|
|
"Base net income" before income taxes and corporate overhead allocation
|
21,668
|
|
|
18,233
|
|
|
16,202
|
|
|
3,435
|
|
|
18.8
|
|
|
2,031
|
|
|
12.5
|
|
|
Corporate overhead allocation
|
(1,379
|
)
|
|
(1,952
|
)
|
|
—
|
|
|
573
|
|
|
(29.4
|
)
|
|
(1,952
|
)
|
|
(100.0
|
)
|
|
"Base net income" before income taxes
|
20,289
|
|
|
16,281
|
|
|
16,202
|
|
|
4,008
|
|
|
24.6
|
|
|
79
|
|
|
0.5
|
|
|
Income tax expense
|
(7,709
|
)
|
|
(6,189
|
)
|
|
(6,156
|
)
|
|
(1,520
|
)
|
|
24.6
|
|
|
(33
|
)
|
|
0.5
|
|
|
"Base net income"
|
$
|
12,580
|
|
|
10,092
|
|
|
10,046
|
|
|
2,488
|
|
|
24.7
|
%
|
|
46
|
|
|
0.5
|
%
|
Before Tax Operating Margin, excluding corporate overhead allocation
|
32.0
|
%
|
|
30.5
|
%
|
|
30.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
December 31, 2011 vs. 2010 Increase (Decrease)
|
|
December 31, 2010 vs. 2009 Increase (Decrease)
|
||||||||||||||||
|
2011
|
|
2010
|
|
2009
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||
Enrollment services revenue
|
$
|
130,470
|
|
|
139,897
|
|
|
119,397
|
|
|
(9,427
|
)
|
|
(6.7
|
)%
|
|
20,500
|
|
|
17.2
|
%
|
Salaries and benefits
|
25,155
|
|
|
24,827
|
|
|
23,222
|
|
|
328
|
|
|
1.3
|
|
|
1,605
|
|
|
6.9
|
|
|
Cost to provide enrollment services
|
86,548
|
|
|
91,647
|
|
|
74,926
|
|
|
(5,099
|
)
|
|
(5.6
|
)
|
|
16,721
|
|
|
22.3
|
|
|
Depreciation and amortization
|
3,204
|
|
|
7,359
|
|
|
3,959
|
|
|
(4,155
|
)
|
|
(56.5
|
)
|
|
3,400
|
|
|
85.9
|
|
|
Impairment expense
|
—
|
|
|
26,599
|
|
|
32,728
|
|
|
(26,599
|
)
|
|
(100.0
|
)
|
|
(6,129
|
)
|
|
(18.7
|
)
|
|
Other expenses
|
9,425
|
|
|
10,681
|
|
|
9,267
|
|
|
(1,256
|
)
|
|
(11.8
|
)
|
|
1,414
|
|
|
15.3
|
|
|
Intersegment expenses, net
|
3,521
|
|
|
2,461
|
|
|
1,566
|
|
|
1,060
|
|
|
43.1
|
|
|
895
|
|
|
57.2
|
|
|
Total operating expenses
|
127,853
|
|
|
163,574
|
|
|
145,668
|
|
|
(35,721
|
)
|
|
(21.8
|
)
|
|
17,906
|
|
|
12.3
|
|
|
"Base net income" before income taxes and corporate overhead allocation
|
2,617
|
|
|
(23,677
|
)
|
|
(26,271
|
)
|
|
26,294
|
|
|
(111.1
|
)
|
|
2,594
|
|
|
(9.9
|
)
|
|
Corporate overhead allocation
|
(1,379
|
)
|
|
(1,952
|
)
|
|
—
|
|
|
573
|
|
|
(29.4
|
)
|
|
(1,952
|
)
|
|
(100.0
|
)
|
|
"Base net income" before income taxes
|
1,238
|
|
|
(25,629
|
)
|
|
(26,271
|
)
|
|
26,867
|
|
|
(104.8
|
)
|
|
642
|
|
|
(2.4
|
)
|
|
Income tax (expense) benefit
|
(471
|
)
|
|
9,740
|
|
|
9,984
|
|
|
(10,211
|
)
|
|
(104.8
|
)
|
|
(244
|
)
|
|
(2.4
|
)
|
|
"Base net income"
|
$
|
767
|
|
|
(15,889
|
)
|
|
(16,287
|
)
|
|
16,656
|
|
|
(104.8
|
)%
|
|
398
|
|
|
(2.4
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Additional information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
"Base net income"
|
$
|
767
|
|
|
(15,889
|
)
|
|
(16,287
|
)
|
|
16,656
|
|
|
(104.8
|
)%
|
|
398
|
|
|
(2.4
|
)%
|
Impairment expense
|
—
|
|
|
26,599
|
|
|
32,728
|
|
|
(26,599
|
)
|
|
(100.0
|
)
|
|
(6,129
|
)
|
|
(18.7
|
)
|
|
Net tax effect
|
—
|
|
|
(10,108
|
)
|
|
(12,437
|
)
|
|
10,108
|
|
|
(100.0
|
)
|
|
2,329
|
|
|
(18.7
|
)
|
|
"Base net income," excluding impairment expense
|
$
|
767
|
|
|
602
|
|
|
4,004
|
|
|
165
|
|
|
27.4
|
%
|
|
(3,402
|
)
|
|
(85.0
|
)%
|
Before Tax Operating Margin, excluding corporate overhead allocation, list cost amortization, and impairment expense
|
4.1
|
%
|
|
6.8
|
%
|
|
7.8
|
%
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2011
|
||||||||||||||
|
Interactive
marketing (a)
|
|
Publishing
services (b)
|
|
Subtotal
|
|
Resource
centers
and list
marketing (c)
|
|
Total
|
||||||
Enrollment services revenue
|
$
|
109,002
|
|
|
9,505
|
|
|
118,507
|
|
|
11,963
|
|
|
130,470
|
|
Cost to provide enrollment services
|
84,086
|
|
|
2,462
|
|
|
86,548
|
|
|
|
|
|
|
|
|
Gross profit
|
$
|
24,916
|
|
|
7,043
|
|
|
31,959
|
|
|
|
|
|
|
|
Gross profit %
|
22.9
|
%
|
|
74.1
|
%
|
|
27.0
|
%
|
|
|
|
|
|
|
|
Year ended December 31, 2010
|
||||||||||||||
|
Interactive
marketing (a)
|
|
Publishing
services (b)
|
|
Subtotal
|
|
Resource
centers
and list
marketing (c)
|
|
Total
|
||||||
Enrollment services revenue
|
$
|
115,884
|
|
|
10,909
|
|
|
126,793
|
|
|
13,104
|
|
|
139,897
|
|
Cost to provide enrollment services
|
88,553
|
|
|
3,094
|
|
|
91,647
|
|
|
|
|
|
|
|
|
Gross profit
|
$
|
27,331
|
|
|
7,815
|
|
|
35,146
|
|
|
|
|
|
|
|
Gross profit %
|
23.6
|
%
|
|
71.6
|
%
|
|
27.7
|
%
|
|
|
|
|
|
|
|
Year ended December 31, 2009
|
||||||||||||||
|
Interactive
marketing (a)
|
|
Publishing
services (b)
|
|
Subtotal
|
|
Resource
centers
and list
marketing (c)
|
|
Total
|
||||||
Enrollment services revenue
|
$
|
94,593
|
|
|
12,167
|
|
|
106,760
|
|
|
12,637
|
|
|
119,397
|
|
Cost to provide enrollment services
|
70,755
|
|
|
4,171
|
|
|
74,926
|
|
|
|
|
|
|
|
|
Gross profit
|
$
|
23,838
|
|
|
7,996
|
|
|
31,834
|
|
|
|
|
|
|
|
Gross profit %
|
25.2
|
%
|
|
65.7
|
%
|
|
29.8
|
%
|
|
|
|
|
|
|
(a)
|
Interactive marketing revenue
decreased
$6.9 million
(
5.9%
) for the year ended
December 31, 2011
compared with
2010
as a result of a decrease in interactive marketing services volume. The gross profit margin for the year ended
December 31, 2011
compared to
2010
decreased
as a result of more competitive pricing. Revenue and profit margin have been affected by the current regulatory uncertainty in the for-profit college industry, which has caused schools to decrease spending on marketing efforts.
|
(b)
|
Publishing services revenue
decreased
$1.4 million
(
12.9%
) for the year ended
December 31, 2011
compared with
2010
due to competition related to online delivery of similar products and the timing of book releases and types of products sold. The gross profit margin for publishing
increased
for the year ended
December 31, 2011
compared to the same period in
2010
as a result of a shift in the mix of products sold.
|
(c)
|
Resource centers and list marketing revenue
decreased
$1.1 million
(
8.7%
) for year ended
December 31, 2011
compared with
2010
due to decreases in customer spending in both resource center products and list sales.
|
(a)
|
Interactive marketing revenue
increased
$21.3 million
(
22.5%
) for the year ended
December 31, 2010
compared with
2009
as a result of an increase in interactive marketing services volume. The gross profit margin for the year ended
December 31, 2010
compared to
2009
decreased
as a result of a decrease in sales of products with a higher profit margin.
|
(b)
|
Publishing services revenue
decreased
$1.3 million
(
10.3%
) for the year ended
December 31, 2010
compared with
2009
due to competition related to online delivery of similar products. The gross profit margin for publishing and editing services
increased
as a result of a shift in the mix of products sold.
|
(c)
|
Resource centers and list marketing revenue
increased
$0.5 million
(
3.7%
) for year ended
December 31, 2010
compared with
2009
. Resource centers revenue increased due to an increase in contracts for new customers and pricing increases for existing customers. The increase in resource centers revenue was offset by a decrease in list sales.
|
•
|
Continued recognition of significant fixed rate floor income due to historically low interest rates.
|
•
|
The purchase of $2.8 billion of FFELP student loans during
2011
from various third parties, including the
$1.9 billion
loan acquisition described below.
|
|
As of
|
|
As of
|
|
As of
|
|||||||
|
December 31,
2011 |
|
December 31,
2010 |
|
December 31,
2009 |
|||||||
|
Held for investment
|
|
Held for investment
|
|
Held for sale (a)
|
|
Held for investment
|
|||||
Federally insured loans:
|
|
|
|
|
|
|
|
|||||
Stafford and other
|
$
|
7,480,182
|
|
|
7,927,525
|
|
|
—
|
|
|
7,620,792
|
|
Consolidation
|
16,852,527
|
|
|
15,830,174
|
|
|
—
|
|
|
15,851,761
|
|
|
Total
|
24,332,709
|
|
|
23,757,699
|
|
|
—
|
|
|
23,472,553
|
|
|
Non-federally insured loans
|
26,916
|
|
|
26,370
|
|
|
84,987
|
|
|
163,321
|
|
|
|
24,359,625
|
|
|
23,784,069
|
|
|
84,987
|
|
|
23,635,874
|
|
|
Unamortized loan (discount) premium and deferred origination costs, net
|
(13,267
|
)
|
|
207,571
|
|
|
—
|
|
|
341,970
|
|
|
Allowance for loan losses – federally insured loans
|
(37,205
|
)
|
|
(32,908
|
)
|
|
—
|
|
|
(30,102
|
)
|
|
Allowance for loan losses – non-federally insured loans
|
(11,277
|
)
|
|
(10,718
|
)
|
|
—
|
|
|
(20,785
|
)
|
|
|
$
|
24,297,876
|
|
|
23,948,014
|
|
|
84,987
|
|
|
23,926,957
|
|
|
|
|
|
|
|
|
|
|||||
Allowance for federally insured loans as a percentage of such loans
|
0.15
|
%
|
|
0.14
|
%
|
|
|
|
|
0.13
|
%
|
|
|
|
|
|
|
|
|
|
|||||
Allowance for non-federally insured loans as a percentage of such loans (b)
|
41.90
|
%
|
|
40.64
|
%
|
|
|
|
|
12.73
|
%
|
(a)
|
On January 13, 2011, the Company sold a portfolio of non-federally insured loans for proceeds of
$91.3 million
(100% of par value). The Company retained credit risk related to this portfolio and will pay cash to purchase back any loans which become 60 days delinquent. As of December 31, 2010, the Company classified this portfolio as held-for-sale and the loans were carried at fair value.
|
(b)
|
The allowance for non-federally insured loans as a percentage of such loans significantly increased during 2010. After selling a significant portion of its non-federally insured loans in 2009 and 2010, the remaining balance of non-federally insured loans classified as held for investment includes loans with higher credit risk.
|
|
Year ended December 31,
|
||||||||
|
2011
|
|
2010
|
|
2009
|
||||
Beginning balance (loans held for investment)
|
$
|
23,784,069
|
|
|
23,635,874
|
|
|
25,061,049
|
|
Loan originations
|
—
|
|
|
831,048
|
|
|
1,669,582
|
|
|
Loan acquisitions
|
2,841,334
|
|
|
3,371,116
|
|
|
1,110,291
|
|
|
Total originations and acquisitions (a)
|
2,841,334
|
|
|
4,202,164
|
|
|
2,779,873
|
|
|
Repayments, claims, capitalized interest, participations, and other
|
(1,650,489
|
)
|
|
(1,221,662
|
)
|
|
(1,443,191
|
)
|
|
Consolidation loans lost to external parties
|
(585,230
|
)
|
|
(599,927
|
)
|
|
(430,475
|
)
|
|
Loans sold (b)
|
(30,059
|
)
|
|
(2,141,124
|
)
|
|
(2,331,382
|
)
|
|
Loans reclassified to held for sale
|
—
|
|
|
(91,256
|
)
|
|
—
|
|
|
Ending balance (loans held for investment)
|
$
|
24,359,625
|
|
|
23,784,069
|
|
|
23,635,874
|
|
(a)
|
The Reconciliation Act of 2010 resulted in the Company discontinuing originations of new loans under the FFEL Program effective July 1, 2010. However, the Company believes there will be opportunities to continue to
|
(b)
|
During both 2010 and 2009, the Company sold $2.1 billion of student loans to the Department under a program that provided liquidity to student loan lenders. The loan sales in 2011 were not significant.
|
|
Year ended December 31,
|
||||||||
|
2011
|
|
2010
|
|
2009
|
||||
Balance at beginning of period
|
$
|
43,626
|
|
|
50,887
|
|
|
50,922
|
|
Provision for loan losses:
|
|
|
|
|
|
||||
Federally insured loans
|
20,000
|
|
|
18,700
|
|
|
20,000
|
|
|
Non-federally insured loans
|
1,250
|
|
|
4,000
|
|
|
9,000
|
|
|
Total provision for loan losses
|
21,250
|
|
|
22,700
|
|
|
29,000
|
|
|
Charge-offs:
|
|
|
|
|
|
|
|
||
Federally insured loans
|
(17,166
|
)
|
|
(18,603
|
)
|
|
(14,954
|
)
|
|
Non-federally insured loans
|
(4,147
|
)
|
|
(7,282
|
)
|
|
(5,304
|
)
|
|
Total charge-offs
|
(21,313
|
)
|
|
(25,885
|
)
|
|
(20,258
|
)
|
|
|
|
|
|
|
|
|
|
||
Recoveries - non-federally insured loans
|
1,310
|
|
|
1,263
|
|
|
1,543
|
|
|
Purchase (sale) of loans, net:
|
|
|
|
|
|
||||
Federally insured loans
|
1,463
|
|
|
2,710
|
|
|
(520
|
)
|
|
Non-federally insured loans
|
—
|
|
|
220
|
|
|
—
|
|
|
Reserve related to loans reclassified to held for sale
|
—
|
|
|
(6,269
|
)
|
|
—
|
|
|
Transfer to/from repurchase obligation related to loans sold/purchased, net
|
2,146
|
|
|
(2,000
|
)
|
|
(9,800
|
)
|
|
Balance at end of period
|
$
|
48,482
|
|
|
43,626
|
|
|
50,887
|
|
|
|
|
|
|
|
||||
Allocation of the allowance for loan losses:
|
|
|
|
|
|
|
|
||
Federally insured loans
|
$
|
37,205
|
|
|
32,908
|
|
|
30,102
|
|
Non-federally insured loans
|
11,277
|
|
|
10,718
|
|
|
20,785
|
|
|
Total allowance for loan losses
|
$
|
48,482
|
|
|
43,626
|
|
|
50,887
|
|
|
Year ended December 31,
|
||||||||
|
2011
|
|
2010
|
|
2009
|
||||
Beginning balance
|
$
|
12,600
|
|
|
10,600
|
|
|
—
|
|
Repurchase obligation transferred to/from the allowance for loan losses related to loans purchased/sold, net
|
(2,146
|
)
|
|
2,000
|
|
|
9,800
|
|
|
Repurchase obligation associated with loans sold
|
6,269
|
|
|
—
|
|
|
—
|
|
|
Current period expense
|
2,500
|
|
|
—
|
|
|
800
|
|
|
Ending balance
|
$
|
19,223
|
|
|
12,600
|
|
|
10,600
|
|
|
As of December 31,
|
|||||||||||||||||||
|
2011
|
|
2010
|
|
2009
|
|||||||||||||||
|
Dollars
|
|
Percent
|
|
Dollars
|
|
Percent
|
|
Dollars
|
|
Percent
|
|||||||||
Federally Insured Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Loans in-school/grace/deferment (a)
|
$
|
3,664,899
|
|
|
|
|
$
|
4,358,616
|
|
|
|
|
$
|
5,783,648
|
|
|
|
|||
Loans in forbearance (b)
|
3,330,452
|
|
|
|
|
2,984,869
|
|
|
|
|
2,495,672
|
|
|
|
||||||
Loans in repayment status:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Loans current
|
14,600,372
|
|
|
84.2
|
%
|
|
14,309,480
|
|
|
87.2
|
%
|
|
13,038,428
|
|
|
85.8
|
%
|
|||
Loans delinquent 31-60 days (c)
|
844,204
|
|
|
4.9
|
|
|
794,140
|
|
|
4.8
|
|
|
691,232
|
|
|
4.5
|
|
|||
Loans delinquent 61-90 days (c)
|
407,094
|
|
|
2.3
|
|
|
306,853
|
|
|
1.9
|
|
|
314,265
|
|
|
2.1
|
|
|||
Loans delinquent 91-270 days (c)
|
1,163,437
|
|
|
6.7
|
|
|
789,795
|
|
|
4.8
|
|
|
906,608
|
|
|
6.0
|
|
|||
Loans delinquent 271 days or greater (c)(d)
|
322,251
|
|
|
1.9
|
|
|
213,946
|
|
|
1.3
|
|
|
242,700
|
|
|
1.6
|
|
|||
Total loans in repayment
|
17,337,358
|
|
|
100.0
|
%
|
|
16,414,214
|
|
|
100.0
|
%
|
|
15,193,233
|
|
|
100.0
|
%
|
|||
Total federally insured loans
|
$
|
24,332,709
|
|
|
|
|
|
$
|
23,757,699
|
|
|
|
|
|
$
|
23,472,553
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Non-Federally Insured Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Loans in-school/grace/deferment (a)
|
$
|
2,058
|
|
|
|
|
|
$
|
3,500
|
|
|
|
|
|
$
|
34,815
|
|
|
|
|
Loans in forbearance (b)
|
371
|
|
|
|
|
|
292
|
|
|
|
|
|
1,919
|
|
|
|
||||
Loans in repayment status:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Loans current
|
16,776
|
|
|
68.5
|
%
|
|
16,679
|
|
|
73.9
|
%
|
|
118,761
|
|
|
93.8
|
%
|
|||
Loans delinquent 31-60 days (c)
|
706
|
|
|
2.9
|
|
|
1,546
|
|
|
6.8
|
|
|
3,023
|
|
|
2.4
|
|
|||
Loans delinquent 61-90 days (c)
|
1,987
|
|
|
8.1
|
|
|
1,163
|
|
|
5.2
|
|
|
1,559
|
|
|
1.2
|
|
|||
Loans delinquent 91 days or greater (c)
|
5,018
|
|
|
20.5
|
|
|
3,190
|
|
|
14.1
|
|
|
3,224
|
|
|
2.5
|
|
|||
Total loans in repayment
|
24,487
|
|
|
100.0
|
%
|
|
22,578
|
|
|
100.0
|
%
|
|
126,567
|
|
|
100.0
|
%
|
|||
Total non-federally insured loans
|
$
|
26,916
|
|
|
|
|
|
$
|
26,370
|
|
|
|
|
|
$
|
163,301
|
|
|
|
(a)
|
Loans for borrowers who still may be attending school or engaging in other permitted educational activities and are not yet required to make payments on the loans,
e.g.
, residency periods for medical students or a grace period for bar exam preparation for law students.
|
(b)
|
Loans for borrowers who have temporarily ceased making full payments due to hardship or other factors, according to a schedule approved by the servicer consistent with the established loan program servicing procedures and policies.
|
(c)
|
The period of delinquency is based on the number of days scheduled payments are contractually past due and relate to repayment loans, that is, receivables not charged off, and not in school, grace, deferment, or forbearance.
|
(d)
|
A portion of loans included in loans delinquent 271 days or greater include federally insured loans in claim status, which are loans that have gone into default and have been submitted to the guaranty agency.
|
|
Year ended December 31,
|
||||||||
|
2011
|
|
2010
|
|
2009
|
||||
Variable student loan yield, gross
|
2.58
|
%
|
|
2.64
|
%
|
|
2.87
|
%
|
|
Consolidation rebate fees
|
(0.72
|
)
|
|
(0.68
|
)
|
|
(0.70
|
)
|
|
Premium/discount and deferred origination costs amortization/accretion (a)
|
(0.09
|
)
|
|
(0.20
|
)
|
|
(0.30
|
)
|
|
Variable student loan yield, net
|
1.77
|
|
|
1.76
|
|
|
1.87
|
|
|
Student loan cost of funds - interest expense
|
(0.84
|
)
|
|
(0.83
|
)
|
|
(1.40
|
)
|
|
Student loan cost of funds - bonds and notes payable discount accretion (a)
|
(0.06
|
)
|
|
—
|
|
|
—
|
|
|
Student loan cost of funds - derivative settlements
|
0.05
|
|
|
0.03
|
|
|
0.16
|
|
|
Variable student loan spread
|
0.92
|
|
|
0.96
|
|
|
0.63
|
|
|
Variable rate floor income, net of settlements on derivatives
|
—
|
|
|
—
|
|
|
(0.03
|
)
|
|
Fixed rate floor income, net of settlements on derivatives
|
0.60
|
|
|
0.52
|
|
|
0.58
|
|
|
Core student loan spread
|
1.52
|
%
|
|
1.48
|
%
|
|
1.18
|
%
|
|
Average balance of student loans
|
$
|
24,045,003
|
|
|
25,212,190
|
|
|
24,794,311
|
|
Average balance of debt outstanding
|
24,237,459
|
|
|
25,327,210
|
|
|
25,286,533
|
|
(a)
|
As previously disclosed, on July 8, 2011, the Company purchased the residual interest in
$1.9 billion
of consolidation loans and recorded the loans and related debt at fair value resulting in the recognition of a significant student loan discount and bonds and notes payable discount. These discounts are being accreted using the effective interest method over the lives of the underlying assets/liabilities.
|
(a)
|
The interest earned on the majority of the Company's FFELP student loan assets is indexed to the three-month commercial paper indice. The Company funds the majority of its assets with the three-month LIBOR indexed floating rate securities. The relationship between these two indices has a significant impact on student loan spread. This table (the right axis) shows the difference between the average three-month LIBOR and commercial paper indices by quarter.
|
•
|
The tightening/widening of the CP/LIBOR spread increases/decreases variable student loan spread. Historically, the movement of the various interest rate indices received on the Company’s student loan assets, primarily three-month commercial paper, and paid on the debt to fund such loans, primarily LIBOR, was highly correlated. The short-term movement of these indices was dislocated beginning in August 2007, which negatively impacted the Company’s net interest income through the first half of 2009. Beginning in the third quarter of 2009, the CP/LIBOR spread began to tighten to more historical levels, which had a positive impact on spread. In 2010, the average CP/LIBOR spread was 5 basis points compared to 28 basis points in 2009, which resulted in an improved variable student loan spread in 2010 compared with 2009. In 2011, the average CP/LIBOR spread was 13 basis points compared to 5 basis points in 2010, which resulted in a decrease in variable student loan spread in 2011 compared with 2010.
|
•
|
A decrease in the amortization of loan premiums/discounts and deferred origination costs as a result of loans purchased at a discount, reducing the net costs being amortized.
|
|
Year ended December 31,
|
||||||||
|
2011
|
|
2010
|
|
2009
|
||||
Fixed rate floor income, gross
|
$
|
164,700
|
|
|
151,861
|
|
|
147,107
|
|
Derivative settlements (a)
|
(20,246
|
)
|
|
(19,618
|
)
|
|
(2,009
|
)
|
|
Fixed rate floor income, net
|
$
|
144,454
|
|
|
132,243
|
|
|
145,098
|
|
Fixed rate floor income contribution to spread, net
|
0.60
|
%
|
|
0.52
|
%
|
|
0.58
|
%
|
(a)
|
Includes settlement payments on derivatives used to hedge student loans earning fixed rate floor income.
|
|
Year ended December 31,
|
|
December 31, 2011 vs. 2010 Increase (Decrease)
|
|
December 31, 2010 vs. 2009 Increase (Decrease)
|
||||||||||||||||
|
2011
|
|
2010
|
|
2009
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||
Net interest income after provision for loan losses
|
$
|
347,811
|
|
|
362,059
|
|
|
222,213
|
|
|
(14,248
|
)
|
|
(3.9
|
)%
|
|
139,846
|
|
|
62.9
|
%
|
Other income
|
15,416
|
|
|
18,639
|
|
|
17,169
|
|
|
(3,223
|
)
|
|
(17.3
|
)
|
|
1,470
|
|
|
8.6
|
|
|
Gain on sale of loans and debt repurchases, net
|
1,433
|
|
|
73,709
|
|
|
63,676
|
|
|
(72,276
|
)
|
|
(98.1
|
)
|
|
10,033
|
|
|
15.8
|
|
|
Derivative settlements, net
|
(7,228
|
)
|
|
(13,336
|
)
|
|
39,286
|
|
|
6,108
|
|
|
(45.8
|
)
|
|
(52,622
|
)
|
|
(133.9
|
)
|
|
Total other income
|
9,621
|
|
|
79,012
|
|
|
120,131
|
|
|
(69,391
|
)
|
|
(87.8
|
)
|
|
(41,119
|
)
|
|
(34.2
|
)
|
|
Salaries and benefits
|
2,791
|
|
|
4,524
|
|
|
6,767
|
|
|
(1,733
|
)
|
|
(38.3
|
)
|
|
(2,243
|
)
|
|
(33.1
|
)
|
|
Other expenses
|
13,381
|
|
|
12,752
|
|
|
19,566
|
|
|
629
|
|
|
4.9
|
|
|
(6,814
|
)
|
|
(34.8
|
)
|
|
Intersegment expenses, net
|
70,018
|
|
|
85,278
|
|
|
81,335
|
|
|
(15,260
|
)
|
|
(17.9
|
)
|
|
3,943
|
|
|
4.8
|
|
|
Total operating expenses
|
86,190
|
|
|
102,554
|
|
|
107,668
|
|
|
(16,364
|
)
|
|
(16.0
|
)
|
|
(5,114
|
)
|
|
(4.7
|
)
|
|
"Base net income" before income taxes and corporate overhead allocation
|
271,242
|
|
|
338,517
|
|
|
234,676
|
|
|
(67,275
|
)
|
|
(19.9
|
)
|
|
103,841
|
|
|
44.2
|
|
|
Corporate overhead allocation
|
(6,896
|
)
|
|
(9,759
|
)
|
|
—
|
|
|
2,863
|
|
|
(29.3
|
)
|
|
(9,759
|
)
|
|
(100.0
|
)
|
|
"Base net income" before income taxes
|
264,346
|
|
|
328,758
|
|
|
234,676
|
|
|
(64,412
|
)
|
|
(19.6
|
)
|
|
94,082
|
|
|
40.1
|
|
|
Income tax expense
|
(100,451
|
)
|
|
(124,928
|
)
|
|
(89,178
|
)
|
|
24,477
|
|
|
(19.6
|
)
|
|
(35,750
|
)
|
|
40.1
|
|
|
"Base net income"
|
$
|
163,895
|
|
|
203,830
|
|
|
145,498
|
|
|
(39,935
|
)
|
|
(19.6
|
)%
|
|
58,332
|
|
|
40.1
|
%
|
|
Year ended December 31,
|
|
December 31, 2011 vs. 2010 Increase(Decrease)
|
|
December 31, 2010 vs. 2009 Increase(Decrease)
|
||||||||||||||||
|
2011
|
|
2010
|
|
2009
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||
Variable interest income, net of settlements on derivatives (a)
|
$
|
633,486
|
|
|
674,826
|
|
|
744,213
|
|
|
(41,340
|
)
|
|
(6.1
|
)%
|
|
(69,387
|
)
|
|
(9.3
|
)%
|
Consolidation rebate fees (b)
|
(174,387
|
)
|
|
(170,998
|
)
|
|
(174,075
|
)
|
|
(3,389
|
)
|
|
2.0
|
|
|
3,077
|
|
|
(1.8
|
)
|
|
Amortization/accretion of loan premiums/discounts and deferred origination costs, net (c)
|
(21,095
|
)
|
|
(50,731
|
)
|
|
(73,529
|
)
|
|
29,636
|
|
|
(58.4
|
)
|
|
22,798
|
|
|
(31.0
|
)
|
|
Interest on bonds and notes payable (d)
|
(204,946
|
)
|
|
(210,968
|
)
|
|
(355,929
|
)
|
|
6,022
|
|
|
(2.9
|
)
|
|
144,961
|
|
|
(40.7
|
)
|
|
Bonds and notes payable discount accretion (e)
|
(13,695
|
)
|
|
—
|
|
|
—
|
|
|
(13,695
|
)
|
|
(100.0
|
)
|
|
—
|
|
|
—
|
|
|
Variable student loan interest margin, net of settlements on derivatives
|
219,363
|
|
|
242,129
|
|
|
140,680
|
|
|
(22,766
|
)
|
|
(9.4
|
)
|
|
101,449
|
|
|
72.1
|
|
|
Fixed rate floor income, net of settlements on derivatives (f)
|
144,454
|
|
|
132,243
|
|
|
145,098
|
|
|
12,211
|
|
|
9.2
|
|
|
(12,855
|
)
|
|
(8.9
|
)
|
|
Investment interest (g)
|
1,051
|
|
|
1,421
|
|
|
6,724
|
|
|
(370
|
)
|
|
(26.0
|
)
|
|
(5,303
|
)
|
|
(78.9
|
)
|
|
Intercompany interest
|
(3,035
|
)
|
|
(4,370
|
)
|
|
(2,003
|
)
|
|
1,335
|
|
|
(30.5
|
)
|
|
(2,367
|
)
|
|
118.2
|
|
|
Provision for loan losses (h)
|
(21,250
|
)
|
|
(22,700
|
)
|
|
(29,000
|
)
|
|
1,450
|
|
|
(6.4
|
)
|
|
6,300
|
|
|
(21.7
|
)
|
|
Net interest income after provision for loan losses (net of settlements on derivatives (i))
|
$
|
340,583
|
|
|
348,723
|
|
|
261,499
|
|
|
(8,140
|
)
|
|
(2.3
|
)%
|
|
87,224
|
|
|
33.4
|
%
|
(a)
|
Variable interest income, net of settlements on derivatives,
decreased
year over year as a result of a
decrease
in the yield earned on student loans, net of derivative settlements (2.63% in 2011, 2.67% in 2010, and 3.03% in 2009). In addition, the average student loan portfolio decreased
$1.2 billion
(
4.6%
) during
2011
compared to the same period in
2010
. The
decrease
in yield in 2010 compared to 2009 was partially offset by a
$0.4 billion
(
1.7%
)
increase
in the average student loan portfolio balance.
|
(b)
|
Consolidation rebate fees
increased
in
2011
compared to
2010
due to the purchase of the residual interest in
$1.9 billion
of consolidation loans in July 2011. Consolidation rebate fees
decreased
in
2010
compared to
2009
due to decreases in the average consolidation loan portfolio, for which such fees are paid.
|
(c)
|
The amortization/accretion of loan premiums/discounts and deferred origination costs
decreased
year over year as a result of the purchase of loans at a discount, which has reduced the net costs being amortized/accreted.
|
(d)
|
Interest expense
decreased
in 2011 compared to 2010 as a result of a decrease in average debt outstanding of
$1.1 billion
(
4.3%
). Interest expense decreased in 2010 compared to 2009 due to a decrease in the cost of funds from 1.40% in 2009 to 0.83% in 2010.
|
(e)
|
During July 2011, the Company recorded a discount on bonds and notes payable assumed as a result of the purchase of the residual interest on
$1.9 billion
of student loans and related debt. The bonds and notes payable discount is being accreted using the effective interest method over the lives of the bonds and notes payable.
|
(f)
|
Depending on the type of loan and when it was originated, the borrower rate on student loans is either fixed to term or is reset to an annual rate each July 1. As a result, for loans where the borrower rate is fixed to term, the Company may earn floor income for an extended period of time, which the Company refers to as fixed rate floor income. A summary of fixed rate floor income follows.
|
|
Year ended December 31,
|
||||||||
|
2011
|
|
2010
|
|
2009
|
||||
Fixed rate floor income, gross
|
$
|
164,700
|
|
|
151,861
|
|
|
147,107
|
|
Derivative settlements (a)
|
(20,246
|
)
|
|
(19,618
|
)
|
|
(2,009
|
)
|
|
Fixed rate floor income, net
|
$
|
144,454
|
|
|
132,243
|
|
|
145,098
|
|
(a)
|
Includes settlement payments on derivatives used to hedge student loans earning fixed rate floor income.
|
(g)
|
Investment income decreased year over year due to a decrease in interest rates as well as a decrease in average cash held over the same periods.
|
(h)
|
The provision for loan losses represents the periodic expense of maintaining an allowance sufficient to absorb losses inherent in the Company's portfolio of loans. The non-federally insured loan provision decreased $2.8 million and $5.0 million during the years ended December 31, 2011 and 2010, respectively, compared to the same periods in 2010 and 2009. The decrease in 2010 from 2009 is primarily due to a decrease in the dollar amount of the Company's non-federally insured student loan portfolio, including those loans in repayment and loans delinquent, as well as continued aging of the portfolio. The decrease in 2011 from 2010 is primarily due to the continued aging of the portfolio.
|
(i)
|
The Company maintains an overall risk management strategy that incorporates the use of derivative instruments to reduce the economic effect of interest rate volatility. Management has structured the majority of the Company’s derivative transactions with the intent that each is economically effective; however, the Company’s derivative instruments do not qualify for hedge accounting. Derivative settlements for each applicable period should be evaluated with the Company’s net interest income.
|
|
Year ended December 31,
|
||||||||
|
2011
|
|
2010
|
|
2009
|
||||
Borrower late fee income
|
$
|
12,647
|
|
|
12,390
|
|
|
11,305
|
|
Other
|
2,769
|
|
|
6,249
|
|
|
5,864
|
|
|
Other income
|
$
|
15,416
|
|
|
18,639
|
|
|
17,169
|
|
|
Year ended December 31,
|
||||||||
|
2011
|
|
2010
|
|
2009
|
||||
Gain on sale of loans (a)
|
$
|
1,378
|
|
|
33,748
|
|
|
35,148
|
|
Gain on debt repurchases - asset-backed securities (b)
|
55
|
|
|
39,961
|
|
|
28,528
|
|
|
Gain on sale of loans and debt repurchases, net
|
$
|
1,433
|
|
|
73,709
|
|
|
63,676
|
|
(a)
|
Included in the gain on sale of loans for the years ended December 31, 2010 and 2009 are gains of $33.8 million and $36.6 million, respectively, resulting from the sale of $2.1 billion of student loans in each of these years to the Department under a program that provided liquidity to student loan lenders.
|
(b)
|
During the years ended
December 31, 2011
,
2010
, and
2009
, the Company repurchased asset-backed securities of
$12.3 million
,
$690.8 million
, and
$348.2 million
, respectively. Due to improvements in the capital markets during 2011, the opportunities for the Company to repurchase debt at less than par are becoming more limited.
|
|
As of December 31, 2011
|
||
Sources of primary liquidity:
|
|
||
Cash and cash equivalents
|
$
|
42,570
|
|
Investments
|
50,780
|
|
|
Unencumbered private student loan assets
|
18,009
|
|
|
Asset-backed security investments - Class B subordinated notes (a)
|
76,513
|
|
|
Asset-backed security investments (b)
|
72,516
|
|
|
Available balance on unsecured line of credit (c)
|
210,000
|
|
|
Total sources of primary liquidity
|
$
|
470,388
|
|
(a)
|
As part of the Company’s issuance of asset-backed securitizations in 2008, due to credit market conditions when these notes were issued, the Company purchased the Class B subordinated notes of $76.5 million (par value). These notes are not included on the Company’s consolidated balance sheet. If the credit market conditions continue to improve, the Company anticipates selling these notes to third parties. Upon a sale to third parties, the Company would obtain cash proceeds equal to the market value of the notes on the date of such sale. The amount included in the table above is the par value of these subordinated notes and may not represent market value upon sale of the notes.
|
(b)
|
The Company has repurchased its own asset-backed securities (bonds and notes payable). For accounting purposes, these notes are effectively retired and are not included on the Company’s consolidated balance sheet. However, as of
December 31, 2011
,
$72.5 million
of these securities are legally outstanding at the trust level and the Company could sell these notes to third parties or redeem the notes at par as cash is generated by the trust estate. Upon a sale to third parties, the Company would obtain cash proceeds equal to the market value of the notes on the date of such sale. The amount included in the table above is the par value of these notes and may not represent market value upon sale of the notes.
|
(c)
|
As of
December 31, 2011
, the Company had a $750.0 million unsecured line of credit with a maturity date of May 8, 2012. On February 17, 2012, the Company entered into a new $250.0 million unsecured line of credit. In conjunction with entering into this new agreement, the outstanding balance on the $750.0 million unsecured line of credit of $64.4 million was paid off in full and the agreement was terminated. As of February17, 2012, the $250.0 million unsecured line of credit had an outstanding balance of $40.0 million and $210.0 million was available for future use. The $250.0 million line of credit terminates on February 17, 2016. Included in the table above is the amount of availability on the new line of credit as of February17, 2012.
|
|
As of December 31, 2011
|
||||
|
Carrying
amount
|
|
Final maturity
|
||
Asset Generation and Management:
|
|
|
|
||
Bonds and notes issued in asset-backed securitizations
|
$
|
21,222,978
|
|
|
11/25/15 - 7/27/48
|
FFELP warehouse facilities
|
824,410
|
|
|
7/1/14
|
|
Department of Education Conduit
|
2,339,575
|
|
|
5/8/14
|
|
Other borrowings
|
43,119
|
|
|
11/14/12 - 3/1/22
|
|
|
$
|
24,430,082
|
|
|
|
(a)
|
The Company uses various assumptions, including prepayments and future interest rates, when preparing its cash flow forecast. These assumptions are further discussed below.
|
•
|
A minimum consolidated net worth
|
•
|
A minimum adjusted EBITDA to recourse indebtedness (over the last four rolling quarters)
|
•
|
A limitation on recourse indebtedness
|
•
|
A limitation on the percentage of non-federally insured loans in the Company’s portfolio
|
|
Year ended December 31, 2011
|
|
Year ended December 31, 2010
|
|||||||||||||||
|
Notional amount
|
|
Purchase price
|
|
Gain
|
|
Notional amount
|
|
Purchase price
|
|
Gain
|
|||||||
Unsecured debt - Junior Subordinated Hybrid Securities
|
$
|
62,558
|
|
|
55,651
|
|
|
6,907
|
|
|
34,995
|
|
|
30,073
|
|
|
4,922
|
|
Asset-backed securities
|
12,254
|
|
|
12,199
|
|
|
55
|
|
|
690,750
|
|
|
650,789
|
|
|
39,961
|
|
|
|
$
|
74,812
|
|
|
67,850
|
|
|
6,962
|
|
|
725,745
|
|
|
680,862
|
|
|
44,883
|
|
|
Total shares repurchased
|
|
Purchase price (in thousands)
|
|
Average price of shares repurchased (per share)
|
|||||
|
|
|
||||||||
Year ended December 31, 2011
|
1,436,423
|
|
|
$
|
27,134
|
|
|
$
|
18.89
|
|
|
|
|
|
|
|
|||||
Year ended December 31, 2010
|
1,866,332
|
|
|
$
|
39,805
|
|
|
$
|
21.33
|
|
|
As of December 31, 2011
|
||||||||||||||
|
Total
|
|
Less than 1 year
|
|
1 to 3 years
|
|
3 to 5 years
|
|
More than 5 years
|
||||||
Bonds and notes payable
|
$
|
24,595,169
|
|
|
8,900
|
|
|
3,163,985
|
|
|
314,335
|
|
|
21,107,949
|
|
Operating lease obligations (a)
|
19,214
|
|
|
6,787
|
|
|
9,107
|
|
|
2,986
|
|
|
334
|
|
|
Total
|
$
|
24,614,383
|
|
|
15,687
|
|
|
3,173,092
|
|
|
317,321
|
|
|
21,108,283
|
|
(a)
|
The Company is committed under noncancelable operating leases for certain office and warehouse space and equipment. Operating lease obligations are presented net of approximately
$1.2 million
in sublease arrangements.
|
•
|
Loan and guaranty servicing fees
– Loan servicing fees are determined according to individual agreements with customers and are calculated based on the dollar value of loans, number of loans, or number of borrowers serviced for each customer. Guaranty servicing fees, generally, are calculated based on the number of loans serviced, volume of loans serviced, or amounts collected. Revenue is recognized when earned pursuant to applicable agreements, and when ultimate collection is assured.
|
•
|
Software services revenue
– Software services revenue is determined from individual agreements with customers and includes license and maintenance fees associated with student loan software products. Computer and software consulting and remote hosting revenues are recognized over the period in which services are provided to customers.
|
•
|
Interactive marketing
– Interactive marketing revenue is derived primarily from fees which are earned through the delivery of qualified inquiries or clicks. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is reasonably assured. Delivery is deemed to have occurred at the time a qualified inquiry or click is delivered to the customer provided that no significant obligations remain. From time to time, the Company may agree to credit certain inquiries or clicks if they fail to meet the contractual or other guidelines of a particular client. The Company has established a sales reserve based on historical experience. To date, such credits have been immaterial and within management’s expectations.
|
•
|
List marketing
- Revenue from the sale of lists is generally earned and recognized, net of estimated returns, upon delivery.
|
•
|
Publishing services -
Revenue from the sale of print products is generally earned and recognized, net of estimated returns, upon shipment or delivery.
|
•
|
Resource centers –
Resource centers services include online courses, scholarship search and selection data, career planning, and online information about colleges and universities. The majority of these services are sold based on subscriptions and/or are performance based. Revenues from sales of subscription and performance based services are
|
|
As of December 31, 2011
|
|
As of December 31, 2010
|
||||||||||
|
Dollars
|
|
Percent
|
|
Dollars
|
|
Percent
|
||||||
Fixed-rate loan assets
|
$
|
10,899,733
|
|
|
44.7
|
%
|
|
$
|
8,525,279
|
|
|
35.7
|
%
|
Variable-rate loan assets
|
13,459,892
|
|
|
55.3
|
|
|
15,343,777
|
|
|
64.3
|
|
||
Total
|
$
|
24,359,625
|
|
|
100.0
|
%
|
|
$
|
23,869,056
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
||||||
Fixed-rate debt instruments
|
$
|
29,517
|
|
|
0.1
|
%
|
|
$
|
163,255
|
|
|
0.7
|
%
|
Variable-rate debt instruments
|
24,565,652
|
|
|
99.9
|
|
|
24,509,217
|
|
|
99.3
|
|
||
Total
|
$
|
24,595,169
|
|
|
100.0
|
%
|
|
$
|
24,672,472
|
|
|
100.0
|
%
|
|
Year ended December 31,
|
||||||||
|
2011
|
|
2010
|
|
2009
|
||||
Fixed rate floor income, gross
|
$
|
164,700
|
|
|
151,861
|
|
|
147,107
|
|
Derivative settlements (a)
|
(20,246
|
)
|
|
(19,618
|
)
|
|
(2,009
|
)
|
|
Fixed rate floor income, net
|
$
|
144,454
|
|
|
132,243
|
|
|
145,098
|
|
(a)
|
Includes settlement payments on derivatives used to hedge student loans earning fixed rate floor income.
|
|
|
Borrower/
|
|
Estimated
|
|
Balance of
|
|||
Fixed
|
|
lender
|
|
variable
|
|
assets earning fixed-rate
|
|||
interest
|
|
weighted
|
|
conversion
|
|
floor income as of
|
|||
rate range
|
|
average yield
|
|
rate (a)
|
|
December 31, 2011
|
|||
< 3.0%
|
|
2.88%
|
|
0.24%
|
|
$
|
1,724,692
|
|
|
3.0 - 3.49%
|
|
3.20%
|
|
0.56%
|
|
2,004,077
|
|
|
|
3.5 - 3.99%
|
|
3.65%
|
|
1.01%
|
|
1,963,495
|
|
|
|
4.0 - 4.49%
|
|
4.20%
|
|
1.56%
|
|
1,500,233
|
|
|
|
4.5 - 4.99%
|
|
4.72%
|
|
2.08%
|
|
853,672
|
|
|
|
5.0 - 5.49%
|
|
5.24%
|
|
2.60%
|
|
570,032
|
|
|
|
5.5 - 5.99%
|
|
5.67%
|
|
3.03%
|
|
346,414
|
|
|
|
6.0 - 6.49%
|
|
6.18%
|
|
3.54%
|
|
404,603
|
|
|
|
6.5 - 6.99%
|
|
6.70%
|
|
4.06%
|
|
361,069
|
|
|
|
7.0 - 7.49%
|
|
7.17%
|
|
4.53%
|
|
142,132
|
|
|
|
7.5 - 7.99%
|
|
7.70%
|
|
5.06%
|
|
239,146
|
|
|
|
8.0 - 8.99%
|
|
8.17%
|
|
5.53%
|
|
537,512
|
|
|
|
> 9.0%
|
|
9.04%
|
|
6.40%
|
|
252,656
|
|
|
|
|
|
|
|
|
|
$
|
10,899,733
|
|
|
(a)
|
The estimated variable conversion rate is the estimated short-term interest rate at which loans would convert to a variable rate. As of
December 31, 2011
, the short-term interest rate was 20 basis points.
|
|
|
Notional
|
|
Weighted average fixed rate paid by the Company (a)
|
|||
Maturity
|
|
amount
|
|
||||
2013
|
|
$
|
2,150,000
|
|
|
0.85
|
%
|
2014
|
|
750,000
|
|
|
0.85
|
|
|
2015
|
|
100,000
|
|
|
2.26
|
|
|
2020
|
|
50,000
|
|
|
3.23
|
|
|
|
|
$
|
3,050,000
|
|
|
0.87
|
%
|
(a)
|
For all interest rate derivatives, the Company receives discrete three-month LIBOR.
|
Index
|
|
Frequency of variable resets
|
|
Assets
|
|
Debt outstanding that funded student loan assets (a)
|
|||
3 month H15 financial commercial paper (b)
|
|
Daily
|
|
$
|
23,391,112
|
|
|
—
|
|
3 month Treasury bill
|
|
Varies
|
|
941,597
|
|
|
—
|
|
|
3 month LIBOR (c)
|
|
Quarterly
|
|
—
|
|
|
19,594,573
|
|
|
1 month LIBOR
|
|
Monthly
|
|
—
|
|
|
657,830
|
|
|
Auction-rate or remarketing (d)
|
|
Varies
|
|
—
|
|
|
970,575
|
|
|
Asset-backed commercial paper (e)
|
|
Varies
|
|
—
|
|
|
3,163,985
|
|
|
Other (f)
|
|
|
|
97,373
|
|
|
43,119
|
|
|
|
|
|
|
$
|
24,430,082
|
|
|
24,430,082
|
|
(a)
|
The Company has certain basis swaps outstanding in which the Company receives three-month LIBOR and pays one-month LIBOR plus or minus a spread as defined in the agreements (the "1:3 Basis Swaps"). The Company entered into these derivative instruments to better match the interest rate characteristics on its student loan assets and the debt funding such assets. The following table summarizes these derivatives as of
December 31, 2011
:
|
Maturity
|
|
Notional amounts
|
||
2021
|
|
$
|
250,000
|
|
2023
|
|
1,250,000
|
|
|
2024
|
|
250,000
|
|
|
2026
|
|
800,000
|
|
|
2028
|
|
100,000
|
|
|
2036
|
|
700,000
|
|
|
2039
|
|
150,000
|
|
|
2040
|
|
200,000
|
|
|
|
|
$
|
3,700,000
|
|
(b)
|
The Company’s FFELP student loans earn interest based on the daily average 90-day H15 financial commercial paper index calculated on a fiscal quarter.
|
(c)
|
The Company has Euro-denominated notes that reprice on the EURIBOR index. The Company has entered into derivative instruments (cross-currency interest rate swaps) that convert the EURIBOR index to three-month LIBOR. As a result, these notes are reflected in the three-month LIBOR category in the above table. See “Foreign Currency Exchange Risk.”
|
(d)
|
The interest rates on certain of the Company's asset-backed securities are set and periodically reset via a "dutch auction" (“Auction Rate Securities”) or through a remarketing utilizing remarketing agents (“Variable Rate Demand Notes”). As of
December 31, 2011
, the Company is sponsor on
$751.4 million
of Auction Rate Securities and
$219.2 million
of Variable Rate Demand Notes.
|
(e)
|
Asset-backed commercial paper consists of
$824.4 million
funded in the Company’s FFELP warehouse facilities and
$2.3 billion
funded through the Department’s Conduit Program. Funding for the Conduit Program is provided by the capital markets at a cost based on market rates.
|
(f)
|
Assets include restricted cash and investments and other assets. Debt outstanding includes other debt obligations secured by student loan assets and related collateral.
|
|
Year ended December 31,
|
||||||||
|
2011
|
|
2010
|
|
2009
|
||||
Settlements:
|
|
|
|
|
|
||||
Average/discrete basis swaps
|
$
|
—
|
|
|
140
|
|
|
11,483
|
|
1:3 basis swaps
|
1,446
|
|
|
1,194
|
|
|
21,231
|
|
|
T-Bill/LIBOR basis swaps
|
(253
|
)
|
|
(47
|
)
|
|
—
|
|
|
Interest rate swaps - floor income hedges
|
(20,246
|
)
|
|
(19,618
|
)
|
|
(2,020
|
)
|
|
Interest rate swaps - hybrid debt hedges
|
(744
|
)
|
|
(495
|
)
|
|
—
|
|
|
Cross-currency interest rate swaps
|
11,877
|
|
|
5,109
|
|
|
8,631
|
|
|
Other
|
80
|
|
|
(547
|
)
|
|
(39
|
)
|
|
Total settlements - (expense) income
|
(7,840
|
)
|
|
(14,264
|
)
|
|
39,286
|
|
|
Change in fair value - (expense) income
|
(50,513
|
)
|
|
(77,134
|
)
|
|
6,852
|
|
|
Derivative impact included in the consolidated statements of income
|
$
|
(58,353
|
)
|
|
(91,398
|
)
|
|
46,138
|
|
|
Year ended December 31, 2011
|
||||||||||||||||||||||||||
|
Interest rates
|
|
Asset and funding indice mismatches
|
||||||||||||||||||||||||
|
Change from increase of 100 basis points
|
|
Change from increase of 300 basis points
|
|
|||||||||||||||||||||||
|
|
Increase of 10 basis points
|
|
Increase of 30 basis points
|
|||||||||||||||||||||||
|
Dollar
|
|
Percent
|
|
Dollar
|
|
Percent
|
|
Dollar
|
|
Percent
|
|
Dollar
|
|
Percent
|
||||||||||||
Effect on earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Decrease in pre-tax net income before impact of derivative settlements
|
$
|
(69,225
|
)
|
|
(21.5
|
)%
|
|
$
|
(124,602
|
)
|
|
(38.7
|
)%
|
|
$
|
(24,237
|
)
|
|
(7.5
|
)%
|
|
$
|
(72,712
|
)
|
|
(22.6
|
)%
|
Impact of derivative settlements
|
50,569
|
|
|
15.7
|
|
|
151,705
|
|
|
47.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Increase (decrease) in net income before taxes
|
$
|
(18,656
|
)
|
|
(5.8
|
)%
|
|
$
|
27,103
|
|
|
8.4
|
%
|
|
$
|
(24,237
|
)
|
|
(7.5
|
)%
|
|
$
|
(72,712
|
)
|
|
(22.6
|
)%
|
Increase (decrease) in basic and diluted earnings per share
|
$
|
(0.24
|
)
|
|
|
|
$
|
0.35
|
|
|
|
|
$
|
(0.31
|
)
|
|
|
|
$
|
(0.94
|
)
|
|
|
||||
|
Year ended December 31, 2010
|
||||||||||||||||||||||||||
|
Interest rates
|
|
Asset and funding indice mismatches
|
||||||||||||||||||||||||
|
Change from increase of 100 basis points
|
|
Change from increase of 300 basis points
|
|
|||||||||||||||||||||||
|
|
|
Increase of 10 basis points
|
|
Increase of 30 basis points
|
||||||||||||||||||||||
|
Dollar
|
|
Percent
|
|
Dollar
|
|
Percent
|
|
Dollar
|
|
Percent
|
|
Dollar
|
|
Percent
|
||||||||||||
Effect on earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Decrease in pre-tax net income before impact of derivative settlements
|
$
|
(66,443
|
)
|
|
(22.0
|
)%
|
|
$
|
(121,075
|
)
|
|
(40.0
|
)%
|
|
$
|
(25,327
|
)
|
|
(8.4
|
)%
|
|
$
|
(75,982
|
)
|
|
(25.1
|
)%
|
Impact of derivative settlements
|
71,715
|
|
|
23.7
|
|
|
215,145
|
|
|
71.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Increase (decrease) in net income before taxes
|
$
|
5,272
|
|
|
1.7
|
%
|
|
$
|
94,070
|
|
|
31.1
|
%
|
|
$
|
(25,327
|
)
|
|
(8.4
|
)%
|
|
$
|
(75,982
|
)
|
|
(25.1
|
)%
|
Increase (decrease) in basic and diluted earnings per share
|
$
|
0.07
|
|
|
|
|
$
|
1.20
|
|
|
|
|
$
|
(0.32
|
)
|
|
|
|
$
|
(0.97
|
)
|
|
|
||||
|
Year ended December 31, 2009
|
||||||||||||||||||||||||||
|
Interest rates
|
|
Asset and funding indice mismatches
|
||||||||||||||||||||||||
|
Change from increase of 100 basis points
|
|
Change from increase of 300 basis points
|
|
|||||||||||||||||||||||
|
|
|
Increase of 10 basis points
|
|
Increase of 30 basis points
|
||||||||||||||||||||||
|
Dollar
|
|
Percent
|
|
Dollar
|
|
Percent
|
|
Dollar
|
|
Percent
|
|
Dollar
|
|
Percent
|
||||||||||||
Effect on earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Decrease in pre-tax net income before impact of derivative settlements
|
$
|
(85,275
|
)
|
|
(39.5
|
)%
|
|
$
|
(148,581
|
)
|
|
(68.9
|
)%
|
|
$
|
(25,289
|
)
|
|
(11.7
|
)%
|
|
$
|
(75,867
|
)
|
|
(35.2
|
)%
|
Impact of derivative settlements
|
4,189
|
|
|
1.9
|
|
|
12,567
|
|
|
5.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Decrease in net income before taxes
|
$
|
(81,086
|
)
|
|
(37.6
|
)%
|
|
$
|
(136,014
|
)
|
|
(63.1
|
)%
|
|
$
|
(25,289
|
)
|
|
(11.7
|
)%
|
|
$
|
(75,867
|
)
|
|
(35.2
|
)%
|
Decrease in basic and diluted earnings per share
|
$
|
(1.06
|
)
|
|
|
|
$
|
(1.77
|
)
|
|
|
|
$
|
(0.33
|
)
|
|
|
|
$
|
(0.99
|
)
|
|
|
|
Year ended December 31,
|
||||||||
|
2011
|
|
2010
|
|
2009
|
||||
Re-measurement of Euro Notes
|
$
|
32,706
|
|
|
80,721
|
|
|
(37,654
|
)
|
Change in fair value of cross currency interest rate swaps
|
(14,287
|
)
|
|
(74,899
|
)
|
|
2,497
|
|
|
Total impact to statements of income - income (expense)
|
$
|
18,419
|
|
|
5,822
|
|
|
(35,157
|
)
|
|
Year ended December 31,
|
||||||||
|
2011
|
|
2010
|
|
2009
|
||||
Change in fair value of derivatives
|
$
|
(50,513
|
)
|
|
(77,134
|
)
|
|
6,852
|
|
Foreign currency transaction adjustment (Euro Notes)
|
32,706
|
|
|
80,721
|
|
|
(37,654
|
)
|
|
Derivative settlements, net
|
(7,840
|
)
|
|
(14,264
|
)
|
|
39,286
|
|
|
Derivative market value and foreign currency adjustments and derivative settlements, net - (expense) income
|
$
|
(25,647
|
)
|
|
(10,677
|
)
|
|
8,484
|
|
|
|
As of December 31, 2011
|
||||||||
Plan category
|
|
Number of shares to be issued upon exercise of outstanding options, warrants, and rights (a)
|
|
Weighted-average exercise price of outstanding options, warrants, and rights (b)
|
|
Number of shares remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
|
||||
Equity compensation plans approved by shareholders
|
|
—
|
|
|
—
|
|
|
3,406,619
|
|
(1)
|
Equity compensation plans not approved by shareholders
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
—
|
|
|
—
|
|
|
3,406,619
|
|
|
(1)
|
Includes
2,619,721
,
170,914
, and
615,984
shares of Class A Common Stock remaining available for future issuance under the Nelnet, Inc. Restricted Stock Plan, Nelnet, Inc. Directors Stock Compensation Plan, and Nelnet, Inc. Employee Share Purchase Plan, respectively.
|
(a)
|
1. Consolidated Financial Statements
|
|
|
Page
|
Report of Independent Registered Public Accounting Firm
|
|
F-2
|
Consolidated Balance Sheets as of December 31, 2011 and 2010
|
|
F-3
|
Consolidated Statements of Income for the years ended December 31, 2011, 2010, and 2009
|
|
F-4
|
Consolidated Statements of Shareholders' Equity and Comprehensive Income for the years ended December 31, 2011, 2010, and 2009
|
|
F-5
|
Consolidated Statements of Cash Flows for the years ended December 31, 2011, 2010, and 2009
|
|
F-6
|
Notes to Consolidated Financial Statements
|
|
F-7
|
(b)
|
Exhibits
|
Exhibit Index
|
|
Exhibit No.
|
Description
|
3.1
|
Second Amended and Restated Articles of Incorporation of Nelnet, Inc., and Articles of Amendment thereto, filed as Exhibit 3.1 to the registrant’s Quarterly Report for the period ended September 30, 2006, filed on Form 10-Q and incorporated by reference herein.
|
|
|
3.2
|
Articles of Amendment to Second Amended and Restated Articles of Incorporation of Nelnet, Inc. Incorporated by reference to Exhibit 3.1 to the registrant’s quarterly report for the period ended June 30, 2007, filed on Form 10-Q.
|
|
|
3.3
|
Fifth Amended and Restated Bylaws of Nelnet, Inc., as amended as of February 3, 2010, filed as Exhibit 3.1 to the registrant's current report of Form 8-K filed on February 9, 2010 and incorporated herein by reference.
|
|
|
3.4
|
Sixth Amended and Restated Bylaws of Nelnet, Inc., as amended as of March 18, 2011. Incorporated by reference to Exhibit 3.1 to the registrant's current report on Form 8-K filed on March 24, 2011.
|
|
|
4.1
|
Form of Class A Common Stock Certificate of Nelnet, Inc. Incorporated by reference to Exhibit 4.1 to the registrant’s Form S-1 Registration Statement.
|
|
|
Exhibit Index
|
|
4.2
|
Certain instruments, including indentures of trust, defining the rights of holders of long-term debt of the registrant and its consolidated subsidiaries, none of which instruments authorizes a total amount of indebtedness thereunder in excess of 10 percent of the total assets of the registrant and its subsidiaries on a consolidated basis, are omitted from this Exhibit Index pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K. Many of such instruments have been previously filed with the Securities and Exchange Commission, and the registrant hereby agrees to furnish a copy of any such instrument to the Commission upon request.
|
|
|
4.3
|
Registration Rights Agreement, dated as of December 16, 2003, by and among Nelnet, Inc. and the shareholders of Nelnet, Inc. signatory thereto. Incorporated by reference to Exhibit 4.11 to the registrant’s Form S-1 Registration Statement.
|
|
|
10.1
|
Amended and Restated Participation Agreement, dated as of June 1, 2001, by and between NELnet, Inc. (subsequently renamed National Education Loan Network, Inc.) and Union Bank and Trust Company. Incorporated by reference to Exhibit 10.30 to the registrant's Form S-1 Registration Statement.
|
|
|
10.2
|
First Amendment of Amended and Restated Participation Agreement, entered into as of December 10, 2010, by and between Union Bank and Trust Company and NELnet, Inc. (subsequently renamed National Education Loan Network, Inc.). Incorporated by reference to Exhibit 10.31 to the registrant's Form S-1 Registration Statement.
|
|
|
10.3
|
Second Amendment of Amended and Restated Participation Agreement, dated as of December 1, 2002, by and between Union Bank and Trust Company and Nelnet, Inc. (f/k/a NELnet, Inc.) (subsequently renamed National Education Loan Network, Inc.). Incorporated by reference to Exhibit 10.32 to the registrant's Form S-1 Registration Statement.
|
|
|
10.4
|
Third Amendment to Amended and Restated Participation Agreement between National Education Loan Network, Inc. and Union Bank and Trust Company, dated as of February 5, 2004. Incorporated by reference to Exhibit 10.61 to the registrant’s annual report for the year ended December 31, 2003, filed on Form 10-K.
|
|
|
10.5
|
Fourth Amendment of Amended and Restated Participation Agreement, dated as of August 1, 2005, by and between Union Bank and Trust Company and Nelnet, Inc. (f/k/a NELnet, Inc.) (subsequently renamed National Education Loan Network, Inc.). Incorporated by reference to Exhibit 10.1 to the registrant's quarterly report for the period ended September 30, 2008, filed on Form 10-Q.
|
|
|
10.6
|
Fifth Amendment of Amended and Restated Participation Agreement, dated as of November 1, 2005, by and between Union Bank and Trust Company and Nelnet, Inc. (f/k/a NELnet, Inc.) (subsequently renamed National Education Loan Network, Inc.). Incorporated by reference to Exhibit 10.2 to the registrant's quarterly report for the period ended September 30, 2008, filed on Form 10-Q.
|
|
|
10.7
|
Sixth Amendment of Amended and Restated Participation Agreement, dated as of December 12, 2005, by and between Union Bank and Trust Company and Nelnet, Inc. (f/k/a NELnet, Inc.) (subsequently renamed National Education Loan Network, Inc.). Incorporated by reference to Exhibit 10.3 to the registrant's quarterly report for the period ended September 30, 2008, filed on Form 10-Q.
|
|
|
10.8
|
Seventh Amendment of Amended and Restated Participation Agreement, dated as of July 1, 2008, by and between Union Bank and Trust Company and Nelnet, Inc. (f/k/a NELnet, Inc.) (subsequently renamed National Education Loan Network, Inc.). Incorporated by reference to Exhibit 10.2 to the registrant's quarterly report for the period ended June 30, 2008, filed on Form 10-Q.
|
|
|
10.9
|
Eighth Amendment of Amended and Restated Participation Agreement, dated as of December 24, 2008, by and between Union Bank and Trust Company and Nelnet, Inc. (f/k/a NELnet, Inc.) (subsequently renamed National Education Loan Network, Inc.). Incorporated by reference to Exhibit 10.69 to the registrant's annual report for the year ended December 31, 2008, filed on Form 10-K.
|
|
|
10.10
|
Ninth Amendment of Amended and Restated Participation Agreement, dated as of January 23, 2009, by and between Union Bank and Trust Company and National Education Loan Network, Inc. Incorporated by reference to Exhibit 10.1 to the registrant's quarterly report for the period ended March 31, 2010, filed on Form 10-Q.
|
|
|
10.11
|
Tenth Amendment of Amended and Restated Participation Agreement, dated as of October 19, 2009, by and between Union Bank and Trust Company and National Education Loan Network, Inc. Incorporated by reference to Exhibit 10.2 to the registrant's quarterly report for the period ended March 31, 2010, filed on Form 10-Q.
|
|
|
10.12
|
Eleventh Amendment of Amended and Restated Participation Agreement, dated as of December 14, 2009, by and between Union Bank and Trust Company and National Education Loan Network, Inc. Incorporated by reference to Exhibit 10.3 to the registrant's quarterly report for the period ended March 31, 2010, filed on Form 10-Q.
|
|
|
10.13
|
Twelfth Amendment of Amended and Restated Participation Agreement, dated as of January 1, 2010, by and between Union Bank and Trust Company and National Education Loan Network, Inc. Incorporated by reference to Exhibit 10.4 to the registrant's quarterly report for the period ended March 31, 2010, filed on Form 10-Q.
|
|
|
Exhibit Index
|
|
10.14
|
Thirteenth Amendment of Amended and Restated Participation Agreement, dated as of September 1, 2010, by and between Union Bank and Trust Company and National Education Loan Network, Inc. Incorporated by reference to Exhibit 10.2 to the registrant's quarterly report for the period ended September 30, 2010, filed on Form 10-Q.
|
|
|
10.15
|
Fourteenth Amendment of Amended and Restated Participation Agreement, entered into as of December 10, 2010, by and between Union Bank and Trust Company and National Education Loan Network, Inc. Incorporated by reference to Exhibit 10.15 to the registrant's annual report for the year ended December 31, 2010, filed on Form 10-K.
|
|
|
10.16
|
Fifteenth Amendment of Amended and Restated Participation Agreement, dated as of February 25, 2011, by and between Union Bank and Trust Company and National Education Loan Network, Inc. Incorporated by reference to Exhibit 10.16 to the registrant's annual report for the year ended December 31, 2010, filed on Form 10-K.
|
|
|
10.17
|
Cancellation of the Fifteenth Amendment of Amended and Restated Participation Agreement, dated as of March 16, 2011, by and between Union Bank and Trust Company and National Education Loan Network, Inc. Incorporated by reference to Exhibit 10.1 to the registrant's quarterly report for the period ended March 31, 2011, filed on Form 10-Q.
|
|
|
10.18
|
First Amendment of Guaranteed Purchase Agreement, dated as of March 22, 2011, by and between Nelnet, Inc. and Union Bank and Trust Company. Incorporated by reference to Exhibit 10.2 to the registrant's quarterly report for the period ended March 31, 2011, filed on Form 10-Q.
|
|
|
10.19
|
Guaranteed Purchase Agreement, dated as of March 19, 2001, by and between NELnet, Inc. (subsequently renamed National Education Loan Network, Inc.) and Union Bank and Trust Company. Incorporated by reference to Exhibit 10.36 to the registrant's Form S-1 Registration Statement.
|
|
|
10.20
|
First Amendment of Guaranteed Purchase Agreement, dated as of February 1, 2002, by and between NELnet, Inc. (subsequently renamed National Education Loan Network, Inc.) and Union Bank and Trust Company. Incorporated by reference to Exhibit 10.37 to the registrant's Form S-1 Registration Statement.
|
|
|
10.21
|
Second Amendment of Guaranteed Purchase Agreement, dated as of December 1, 2002, by and between Nelnet, Inc. (f/k/a/ NELnet, Inc.) (subsequently renamed National Education Loan Network, Inc.) and Union Bank and Trust Company. Incorporated by reference to Exhibit 10.38 to the registrant's Form S-1 Registration Statement.
|
|
|
10.22
|
Agreement For Use of Revolving Purchase Facility, dated as of January 1, 1999, by and between Union Bank and Trust Company and National Education Loan Network, Inc. Incorporated by reference to Exhibit 10.78 to the registrant's Form S-1 Registration Statement.
|
|
|
10.23
|
Amendment to Application and Agreement for Standby Letter of Credit, Loan Purchase Agreements, and Standby Student Loan Purchase Agreements, dated effective October 21, 2003, by and among National Education Loan Network, Inc., Nelnet, Inc., Nelnet Education Loan Funding, Inc., Union Bank and Trust Company, and Bank of America, N.A. Incorporated by reference to Exhibit 10.94 to the registrant's Form S-1 Registration Statement.
|
|
|
10.24
|
February 2004 Amendment to Application and Agreement for Standby Letter of Credit, Loan Purchase Agreements and Standby Student Loan Purchase Agreements, dated as of February 20, 2004, among National Education Loan Network, Inc., Nelnet, Inc., Nelnet Education Loan Funding, Inc., Union Bank and Trust Company, and Bank of America, N.A. Incorporated by reference to Exhibit 10.62 to the registrant’s annual report for the year ended December 31, 2003, filed on Form 10-K.
|
|
|
10.25
|
Amendment to Application and Agreement for Standby Letter of Credit, Loan Purchase Agreements, and Standby Student Loan Purchase Agreements, dated effective November 20, 2003, by and among National Education Loan Network, Inc., Nelnet, Inc., Nelnet Education Loan Funding, Inc., Union Bank and Trust Company, and Bank of America, N.A. Incorporated by reference to Exhibit 10.63 to the registrant’s annual report for the year ended December 31, 2003, filed on Form 10-K.
|
|
|
10.26
|
Amendment to Application and Agreement for Standby Letter of Credit, Loan Purchase Agreements, and Standby Student Loan Purchase Agreements, dated effective December 19, 2003, by and among National Education Loan Network, Inc., Nelnet, Inc., Nelnet Education Loan Funding, Inc., Union Bank and Trust Company, and Bank of America, N.A. Incorporated by reference to Exhibit 10.64 to the registrant’s annual report for the year ended December 31, 2003, filed on Form 10-K.
|
|
|
10.27
|
April 2004 Amendment to Application and Agreement for Standby Letter of Credit, Loan Purchase Agreements, and Standby Purchase Agreements, dated effective April 15, 2004, among Bank of America, N.A., Nelnet Education Loan Funding, Inc., National Education Loan Network, Inc, Nelnet, Inc., and Union Bank and Trust Company. Incorporated by reference to Exhibit 10.67 to the registrant’s quarterly report for the period ended March 31, 2004, filed on Form 10-Q.
|
|
|
Exhibit Index
|
|
10.28
|
Stock Purchase Agreement, dated as of April 5, 2004, between National Education Loan Network, Inc. and infiNET Integrated Solutions, Inc. Incorporated by reference to Exhibit 10.72 to the registrant’s quarterly report for the period ended March 31, 2004, filed on Form 10-Q.
|
|
|
10.29
|
Amendment of Agreements dated as of February 4, 2005, by and between National Education Loan Network, Inc. and Union Bank and Trust Company. Incorporated by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K filed on February 10, 2005.
|
|
|
10.30
|
Amended and Restated Aircraft Management Agreement, dated as of September 30, 2008, by and between National Education Loan Network, Inc., Duncan Aviation, Inc., and Union Financial Services, Inc. Incorporated by reference to Exhibit 10.32 to the registrant's annual report for the year ended December 31, 2008, filed on Form 10-K.
|
|
|
10.31
|
Amended and Restated Aircraft Joint Ownership Agreement, dated as of September 30, 2009, by and between National Education Loan Network, Inc. and Union Financial Services, Inc. Incorporated by reference to Exhibit 10.33 to the registrant's annual report for the year ended December 31, 2008, filed on Form 10-K.
|
|
|
10.32
|
Amendment of Agreements dated as of February 4, 2005, by and between Union Bank and Trust Company and National Education Loan Network, Inc., filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on February 10, 2005 and incorporated herein by reference.
|
|
|
10.33+
|
Nelnet, Inc. Employee Share Purchase Plan, as amended. Incorporated by reference to Exhibit 10.1 to the registrant’s quarterly report for the period ended September 30, 2005, filed on Form 10-Q.
|
|
|
10.34+
|
Amended Nelnet, Inc. Employee Share Purchase Plan dated November 10, 2010. Incorporated by reference to Exhibit 10.32 to the registrant's annual report for the year ended December 31, 2010, filed on Form 10-K.
|
|
|
10.35+
|
Nelnet, Inc. Employee Share Purchase Plan, as amended through March 17, 2011. Incorporated by reference to Exhibit 10.4 to the registrant's quarterly report for the period ended March 31, 2011, filed on Form 10-Q.
|
|
|
10.36
|
Office Building Lease dated June 21, 1996 between Miller & Paine and Union Bank and Trust Company, filed as Exhibit 10.3 to the registrant's Current Report on Form 8-K filed on October 16, 2006 and incorporated by reference herein.
|
|
|
10.37
|
Amendment to Office Building Lease dated June 11, 1997 between Miller & Paine and Union Bank and Trust Company, filed as Exhibit 10.4 to the registrant's Current Report on Form 8-K filed on October 16, 2006 and incorporated by reference herein.
|
|
|
10.38
|
Lease Amendment Number Two dated February 8, 2001 between Miller & Paine and Union Bank and Trust Company, filed as Exhibit 10.5 to the registrant's Current Report on Form 8-K filed on October 16, 2006 and incorporated by reference herein.
|
|
|
10.39
|
Lease Amendment Number Three dated May 23, 2005 between Miller & Paine, LLC and Union Bank and Trust Company, filed as Exhibit 10.6 to the registrant's Current Report on Form 8-K filed on October 16, 2006 and incorporated by reference herein.
|
|
|
10.40
|
Lease Agreement dated May 20, 2005 between Miller & Paine, LLC and Union Bank and Trust Company, filed as Exhibit 10.7 to the registrant's Current Report on Form 8-K filed on October 16, 2006 and incorporated by reference herein.
|
|
|
10.41
|
Office Sublease dated April 30, 2001 between Union Bank and Trust Company and Nelnet, Inc., filed as Exhibit 10.8 to the registrant's Current Report on Form 8-K filed on October 16, 2006 and incorporated by reference herein.
|
|
|
10.42
|
Amended and Restated Credit Agreement for $750 million line of credit dated as of May 8, 2007 among Nelnet, Inc., JPMorgan Chase Bank, N.A., individually and as Administrative Agent, Citibank, N.A., individually and as Syndication Agent, and various lender parties thereto, filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on May 10, 2007 and incorporated herein by reference.
|
|
|
10.43+
|
Nelnet, Inc. Restricted Stock Plan, as amended through May 20, 2009, filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on May 27, 2009 and incorporated herein by reference.
|
|
|
10.44
|
Real Estate Purchase Agreement dated as of October 31, 2007 between Union Bank and Trust Company and First National Life of the USA, filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on November 2, 2007 and incorporated herein by reference.
|
|
|
10.45+
|
Nelnet, Inc. Directors Stock Compensation Plan, as amended through April 18, 2008, filed as Exhibit 99.1 to Nelnet, Inc.’s Registration Statement on Form S-8 filed on June 27, 2008 and incorporated herein by reference.
|
|
|
Exhibit Index
|
|
10.46
|
Master Participation Agreement, dated as of July 25, 2008, by and between the United States Department of Education and Nelnet, Inc. Incorporated by reference to Exhibit 10.4 to the registrant's quarterly report for the period ended September 30, 2008, filed on Form 10-Q.
|
|
|
10.47
|
Master Loan Sale Agreement, dated as of July 25, 2008, by and between the United States Department of Education and Nelnet, Inc. Incorporated by reference to Exhibit 10.5 to the registrant's quarterly report for the period ended September 30, 2008, filed on Form 10-Q.
|
|
|
10.48
|
Loan Purchase Agreement, dated as of November 25, 2008, by and between Nelnet Education Loan Funding, Inc., f/k/a NEBHELP, INC., a Nebraska corporation, acting, where applicable, by and through Wells Fargo Bank, National Association, not individually but as Eligible Lender Trustee for the Seller under the Warehouse Agreement or Eligible Lender Trust Agreement, and Union Bank and Trust Company, a Nebraska state bank and trust company, acting in its individual capacity and as trustee. Incorporated by reference to Exhibit 10.71 to the registrant's annual report for the year ended December 31, 2008, filed on Form 10-K.
|
|
|
10.49
|
Loan Servicing Agreement, dated as of November 25, 2008, by and between Nelnet, Inc. and Union Bank and Trust Company. Incorporated by reference to Exhibit 10.72 to the registrant's annual report for the year ended December 31, 2008, filed on Form 10-K.
|
|
|
10.50
|
Assurance Commitment Agreement, dated as of November 25, 2008, by and among Jay L. Dunlap, individually, Angie Muhleisen, individually, and Michael S. Dunlap, individually, Nelnet, Inc., Union Bank and Trust Company, and Farmers & Merchants Investment Inc. Incorporated by reference to Exhibit 10.73 to the registrant's annual report for the year ended December 31, 2008, filed on Form 10-K.
|
|
|
10.51
|
Funding Note Purchase Agreement, dated as of May 13, 2009, among Straight-A Funding, LLC, a Delaware limited liability company, as Conduit Lender, Nelnet Super Conduit Funding, LLC, a Delaware limited liability company, as Funding Note Issuer, First National Bank, a national banking association, as Eligible Lender Trustee, The Bank of New York Mellon, a New York banking corporation, as Conduit Administrator for the Conduit Lender, as Securities Intermediary and as Conduit Lender Eligible Lender Trustee, National Education Loan Network, Inc., a Nevada corporation, as the SPV Administrator for the Funding Note Issuer, Nelnet, Inc., a Nebraska corporation, as Sponsor, BMO Capital Markets Corp., a Delaware company, as Manager for the Conduit Lender, and National Education Loan Network, Inc., a Nevada corporation, as Master Servicer. Incorporated by reference to Exhibit 10.2 to the registrant's quarterly report for the period ended June 30, 2009, filed on Form 10-Q.
|
|
|
10.52
|
Eligible Lender Trust Agreement, dated as of May 13, 2009 between Nelnet Super Conduit Funding, LLC, a Delaware limited liability company, and Zions First National Bank, a national banking association, not in its individual capacity but solely as eligible lender trustee on behalf and for the benefit of the Funding Note Issuer. Incorporated by reference to Exhibit 10.3 to the registrant's quarterly report for the period ended June 30, 2009, filed on Form 10-Q.
|
|
|
10.53
|
Student Loan Purchase Agreement, dated as of May 13, 2009, among National Education Loan Network, Inc., a Nevada corporation, Union Bank and Trust Company, a Nebraska banking corporation, not in its individual capacity but solely as eligible lender trustee for the benefit of the Seller and its assigns, Nelnet Super Conduit Funding, LLC, a Delaware limited liability company, and Zions First National Bank, a national banking association, not in its individual capacity but solely as eligible lender trustee for the benefit of the Purchaser and its assigns. Incorporated by reference to Exhibit 10.4 to the registrant's quarterly report for the period ended June 30, 2009, filed on Form 10-Q.
|
|
|
10.54
|
Student Loan Servicing Contract between the United States Department of Education and Nelnet Servicing, LLC. Incorporated by reference to Exhibit 10.1 to the registrant's quarterly report for the period ended June 30, 2010, filed on Form 10-Q.
|
|
|
10.55
|
Settlement Agreement, made and entered into by and between the United States of America, acting through to Commercial Litigation Branch of the United States Department of Justice and on behalf of the United States Department of Education, Nelnet, Inc., Nelnet Education Loan Funding, Inc., and Jon H. Oberg, filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on October 29, 2010 and incorporated herein by reference.
|
|
|
10.56
|
Guaranteed Purchase Agreement, dated as of September 1, 2010, by and between Nelnet, Inc. and Union Bank and Trust Company. Incorporated by reference to Exhibit 10.3 to the registrant's quarterly report for the period ended September 30, 2010, filed on Form 10-Q.
|
|
|
10.57
|
Management Agreement, dated effective as of May 1, 2011, by Whitetail Rock Capital Management, LLC and Union Bank and Trust Company. Incorporated by reference to Exhibit 10.3 to the registrant's quarterly report for the period ended March 31, 2011 filed on Form 10-Q.
|
10.58*
|
Management Agreement, dated effective as of January 20, 2012, by and between Union Bank and Trust Company and Whitetail Rock Capital Management, LLC.
|
|
|
Dated:
|
February 28, 2012
|
|
|
|
|
NELNET, INC
|
|
|
|
|
|
|
|
By:
|
/s/ MICHAEL S. DUNLAP
|
|
|
Name: Michael S. Dunlap
|
|
|
|
Title: Chairman and Chief Executive Officer
|
|
|
|
|
(Principle Executive Officer)
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ MICHAEL S. DUNLAP
|
|
Chairman and Chief Executive Officer (Principle Executive Officer)
|
|
February 28, 2012
|
Michael S. Dunlap
|
|
|
|
|
|
|
|
|
|
/s/ TERRY J. HEIMES
|
|
Chief Financial Officer (Principle Financial Officer and Principal Accounting Officer)
|
|
February 28, 2012
|
Terry J. Heimes
|
|
|
|
|
|
|
|
|
|
/s/ STEPHEN F. BUTTERFIELD
|
|
Vice Chairman
|
|
February 28, 2012
|
Stephen F. Butterfield
|
|
|
|
|
|
|
|
|
|
/s/ JAMES P. ABEL
|
|
Director
|
|
February 28, 2012
|
James P. Abel
|
|
|
|
|
|
|
|
|
|
/s/ KATHLEEN A. FARRELL
|
|
Director
|
|
February 28, 2012
|
Kathleen A. Farrell
|
|
|
|
|
|
|
|
|
|
/s/ THOMAS E. HENNING
|
|
Director
|
|
February 28, 2012
|
Thomas E. Henning
|
|
|
|
|
|
|
|
|
|
/s/ BRIAN J O'CONNOR
|
|
Director
|
|
February 28, 2012
|
Brian J. O'Connor
|
|
|
|
|
|
|
|
|
|
/s/ KIMBERLY K. RATH
|
|
Director
|
|
February 28, 2012
|
Kimberly K. Rath
|
|
|
|
|
|
|
|
|
|
/s/ MICHAEL D. REARDON
|
|
Director
|
|
February 28, 2012
|
Michael D. Reardon
|
|
|
|
|
Page
|
F-2
|
|
F-3
|
|
F-4
|
|
F-5
|
|
F-6
|
|
F-7
|
NELNET, INC. AND SUBSIDIARIES
|
||||||
Consolidated Balance Sheets
|
||||||
December 31, 2011 and 2010
|
||||||
|
|
|
|
|||
|
2011
|
|
2010
|
|||
|
(Dollars in thousands, except share data)
|
|||||
Assets:
|
|
|
|
|||
Student loans receivable (net of allowance for loan losses of $48,482 and $43,626, respectively)
|
$
|
24,297,876
|
|
|
23,948,014
|
|
Student loans receivable - held for sale
|
—
|
|
|
84,987
|
|
|
Cash and cash equivalents:
|
|
|
|
|
|
|
Cash and cash equivalents - not held at a related party
|
7,299
|
|
|
6,952
|
|
|
Cash and cash equivalents - held at a related party
|
35,271
|
|
|
276,849
|
|
|
Total cash and cash equivalents
|
42,570
|
|
|
283,801
|
|
|
Investments
|
50,780
|
|
|
43,236
|
|
|
Restricted cash and investments
|
614,322
|
|
|
668,757
|
|
|
Restricted cash - due to customers
|
109,809
|
|
|
88,528
|
|
|
Accrued interest receivable
|
308,401
|
|
|
318,152
|
|
|
Accounts receivable (net of allowance for doubtful accounts of $1,284 and $1,221, respectively)
|
63,654
|
|
|
52,614
|
|
|
Goodwill
|
117,118
|
|
|
117,118
|
|
|
Intangible assets, net
|
28,374
|
|
|
38,712
|
|
|
Property and equipment, net
|
34,819
|
|
|
30,573
|
|
|
Other assets
|
92,275
|
|
|
101,054
|
|
|
Fair value of derivative instruments
|
92,219
|
|
|
118,346
|
|
|
Total assets
|
$
|
25,852,217
|
|
|
25,893,892
|
|
Liabilities:
|
|
|
|
|
|
|
Bonds and notes payable
|
$
|
24,434,540
|
|
|
24,672,472
|
|
Accrued interest payable
|
19,634
|
|
|
19,153
|
|
|
Other liabilities
|
178,189
|
|
|
191,017
|
|
|
Due to customers
|
109,809
|
|
|
88,528
|
|
|
Fair value of derivative instruments
|
43,840
|
|
|
16,089
|
|
|
Total liabilities
|
24,786,012
|
|
|
24,987,259
|
|
|
Shareholders' equity:
|
|
|
|
|
|
|
Preferred stock, $0.01 par value. Authorized 50,000,000 shares; no shares issued or outstanding
|
—
|
|
|
—
|
|
|
Common stock:
|
|
|
|
|||
Class A, $0.01 par value. Authorized 600,000,000 shares; issued and outstanding 35,643,102 shares and 36,846,353 shares, respectively
|
356
|
|
|
368
|
|
|
Class B, convertible, $0.01 par value. Authorized 60,000,000 shares; issued and outstanding 11,495,377 shares
|
115
|
|
|
115
|
|
|
Additional paid-in capital
|
49,245
|
|
|
76,263
|
|
|
Retained earnings
|
1,017,629
|
|
|
831,057
|
|
|
Employee notes receivable
|
(1,140
|
)
|
|
(1,170
|
)
|
|
Total shareholders' equity
|
1,066,205
|
|
|
906,633
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
Total liabilities and shareholders' equity
|
$
|
25,852,217
|
|
|
25,893,892
|
|
NELNET, INC. AND SUBSIDIARIES
|
|||||||||
Consolidated Statements of Income
|
|||||||||
Years ended December 31, 2011, 2010, and 2009
|
|||||||||
|
|
|
|
|
|
||||
|
2011
|
|
2010
|
|
2009
|
||||
|
(Dollars in thousands, except share data)
|
||||||||
Interest income:
|
|
|
|
|
|
||||
Loan interest
|
$
|
589,686
|
|
|
598,675
|
|
|
609,920
|
|
Investment interest
|
3,168
|
|
|
5,256
|
|
|
10,287
|
|
|
Total interest income
|
592,854
|
|
|
603,931
|
|
|
620,207
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
Interest on bonds and notes payable
|
228,289
|
|
|
232,860
|
|
|
384,862
|
|
|
Net interest income
|
364,565
|
|
|
371,071
|
|
|
235,345
|
|
|
Less provision for loan losses
|
21,250
|
|
|
22,700
|
|
|
29,000
|
|
|
Net interest income after provision for loan losses
|
343,315
|
|
|
348,371
|
|
|
206,345
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
Loan and guaranty servicing revenue
|
175,657
|
|
|
158,584
|
|
|
129,911
|
|
|
Tuition payment processing and campus commerce revenue
|
67,797
|
|
|
59,824
|
|
|
53,894
|
|
|
Enrollment services revenue
|
130,470
|
|
|
139,897
|
|
|
119,397
|
|
|
Other income
|
29,513
|
|
|
31,310
|
|
|
26,469
|
|
|
Gain on sale of loans and debt repurchases, net
|
8,340
|
|
|
78,631
|
|
|
76,831
|
|
|
Derivative market value and foreign currency adjustments and derivative settlements, net
|
(25,647
|
)
|
|
(10,677
|
)
|
|
8,484
|
|
|
Total other income
|
386,130
|
|
|
457,569
|
|
|
414,986
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
177,951
|
|
|
166,011
|
|
|
151,285
|
|
|
Cost to provide enrollment services
|
86,548
|
|
|
91,647
|
|
|
74,926
|
|
|
Depreciation and amortization
|
29,744
|
|
|
38,444
|
|
|
38,496
|
|
|
Impairment expense
|
—
|
|
|
26,599
|
|
|
32,728
|
|
|
Restructure expense
|
—
|
|
|
6,020
|
|
|
7,982
|
|
|
Litigation settlement
|
—
|
|
|
55,000
|
|
|
—
|
|
|
Other
|
113,415
|
|
|
119,765
|
|
|
100,216
|
|
|
Total operating expenses
|
407,658
|
|
|
503,486
|
|
|
405,633
|
|
|
Income before income taxes
|
321,787
|
|
|
302,454
|
|
|
215,698
|
|
|
Income tax expense
|
117,452
|
|
|
113,420
|
|
|
76,573
|
|
|
Net income
|
$
|
204,335
|
|
|
189,034
|
|
|
139,125
|
|
Earnings per common share:
|
|
|
|
|
|
||||
Net earnings - basic
|
$
|
4.24
|
|
|
3.82
|
|
|
2.79
|
|
Net earnings - diluted
|
$
|
4.23
|
|
|
3.81
|
|
|
2.78
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
||||
Basic
|
47,860,824
|
|
|
49,127,934
|
|
|
49,484,816
|
|
|
Diluted
|
48,047,669
|
|
|
49,326,686
|
|
|
49,685,143
|
|
NELNET, INC. AND SUBSIDIARITES
|
||||||||||||||||||||||||||||||
Consolidated Statements of Shareholders' Equity and Comprehensive Income
|
||||||||||||||||||||||||||||||
Years ended December 31, 2011, 2010, and 2009
|
||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Preferred stock shares
|
|
|
|
|
|
Preferred stock
|
|
Class A common stock
|
|
Class B common stock
|
|
Additional paid-in capital
|
|
Retained earnings
|
|
Employee notes receivable
|
|
Total shareholders' equity
|
|||||||||||
|
|
Common stock shares
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
Class A
|
|
Class B
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
(Dollars in thousands, except share data)
|
|||||||||||||||||||||||||||||
Balance as of December 31, 2008
|
—
|
|
|
37,794,067
|
|
|
11,495,377
|
|
|
$
|
—
|
|
|
378
|
|
|
115
|
|
|
103,762
|
|
|
540,521
|
|
|
(1,550
|
)
|
|
643,226
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
139,125
|
|
|
—
|
|
|
139,125
|
|
|
Cash dividend on Class A and Class B common stock - $0.07 per share
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,492
|
)
|
|
—
|
|
|
(3,492
|
)
|
|
Issuance of common stock, net of forfeitures
|
—
|
|
|
641,153
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
4,365
|
|
|
—
|
|
|
—
|
|
|
4,372
|
|
|
Compensation expense for stock based awards
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,661
|
|
|
—
|
|
|
—
|
|
|
1,661
|
|
|
Repurchase of common stock
|
—
|
|
|
(38,429
|
)
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(429
|
)
|
|
—
|
|
|
—
|
|
|
(430
|
)
|
|
Reduction of employee stock notes receivable
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
101
|
|
|
101
|
|
|
Balance as of December 31, 2009
|
—
|
|
|
38,396,791
|
|
|
11,495,377
|
|
|
—
|
|
|
384
|
|
|
115
|
|
|
109,359
|
|
|
676,154
|
|
|
(1,449
|
)
|
|
784,563
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
189,034
|
|
|
—
|
|
|
189,034
|
|
|
Cash dividend on Class A and Class B common stock - $0.70 per share
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(34,131
|
)
|
|
—
|
|
|
(34,131
|
)
|
|
Issuance of common stock, net of forfeitures
|
—
|
|
|
315,894
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
5,222
|
|
|
—
|
|
|
—
|
|
|
5,225
|
|
|
Compensation expense for stock based awards
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,468
|
|
|
—
|
|
|
—
|
|
|
1,468
|
|
|
Repurchase of common stock
|
—
|
|
|
(1,866,332
|
)
|
|
—
|
|
|
—
|
|
|
(19
|
)
|
|
—
|
|
|
(39,786
|
)
|
|
—
|
|
|
—
|
|
|
(39,805
|
)
|
|
Reduction of employee stock notes receivable
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
279
|
|
|
279
|
|
|
Balance as of December 31, 2010
|
—
|
|
|
36,846,353
|
|
|
11,495,377
|
|
|
—
|
|
|
368
|
|
|
115
|
|
|
76,263
|
|
|
831,057
|
|
|
(1,170
|
)
|
|
906,633
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
204,335
|
|
|
—
|
|
|
204,335
|
|
|
Cash dividend on Class A and Class B common stock - $0.37 per share
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17,763
|
)
|
|
—
|
|
|
(17,763
|
)
|
|
Contingency payment related to business combination
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,893
|
)
|
|
—
|
|
|
—
|
|
|
(5,893
|
)
|
|
Issuance of common stock, net of forfeitures
|
—
|
|
|
233,172
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
4,694
|
|
|
—
|
|
|
—
|
|
|
4,696
|
|
|
Compensation expense for stock based awards
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,301
|
|
|
—
|
|
|
—
|
|
|
1,301
|
|
|
Repurchase of common stock
|
—
|
|
|
(1,436,423
|
)
|
|
—
|
|
|
—
|
|
|
(14
|
)
|
|
—
|
|
|
(27,120
|
)
|
|
—
|
|
|
—
|
|
|
(27,134
|
)
|
|
Reduction of employee stock notes receivable
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30
|
|
|
30
|
|
|
Balance as of December 31, 2011
|
—
|
|
|
35,643,102
|
|
|
11,495,377
|
|
|
$
|
—
|
|
|
356
|
|
|
115
|
|
|
49,245
|
|
|
1,017,629
|
|
|
(1,140
|
)
|
|
1,066,205
|
|
NELNET, INC. AND SUBSIDIARIES
|
||||||||||
Consolidated Statements of Cash Flows
|
||||||||||
Years ended December 31, 2011, 2010, and 2009
|
||||||||||
|
|
2011
|
|
2010
|
|
2009
|
||||
|
|
(Dollars in thousands)
|
||||||||
Net income
|
|
$
|
204,335
|
|
|
189,034
|
|
|
139,125
|
|
Adjustments to reconcile net income to net cash provided by operating activities, net of business and asset acquisitions:
|
|
|
|
|
|
|
|
|
||
Depreciation and amortization, including loan and debt premiums/discounts and deferred origination costs
|
|
72,557
|
|
|
91,244
|
|
|
116,038
|
|
|
Provision for loan losses
|
|
21,250
|
|
|
22,700
|
|
|
29,000
|
|
|
Impairment expense
|
|
—
|
|
|
26,599
|
|
|
32,728
|
|
|
Derivative market value adjustment
|
|
50,513
|
|
|
77,134
|
|
|
(6,852
|
)
|
|
Foreign currency transaction adjustment
|
|
(32,706
|
)
|
|
(80,721
|
)
|
|
37,654
|
|
|
Proceeds to terminate and/or amend derivative instruments
|
|
13,607
|
|
|
15,369
|
|
|
3,870
|
|
|
Payments to terminate and/or amend derivative instruments
|
|
(10,242
|
)
|
|
(3,349
|
)
|
|
(15,069
|
)
|
|
Gain on sale of loans
|
|
(1,378
|
)
|
|
(33,748
|
)
|
|
(35,148
|
)
|
|
Gain from debt repurchases
|
|
(6,962
|
)
|
|
(44,883
|
)
|
|
(41,683
|
)
|
|
Originations and purchases of student loans - held for sale
|
|
—
|
|
|
(42,074
|
)
|
|
(13,345
|
)
|
|
Change in investments - trading securities, net
|
|
(7,544
|
)
|
|
(43,236
|
)
|
|
3,876
|
|
|
Deferred income tax (benefit) expense
|
|
(7,726
|
)
|
|
4,273
|
|
|
(19,057
|
)
|
|
Non-cash compensation expense
|
|
2,029
|
|
|
2,280
|
|
|
2,644
|
|
|
Other non-cash items
|
|
553
|
|
|
409
|
|
|
1,976
|
|
|
Decrease (increase) in accrued interest receivable
|
|
29,220
|
|
|
11,161
|
|
|
142,565
|
|
|
Decrease (increase) in accounts receivable
|
|
(11,040
|
)
|
|
(10,571
|
)
|
|
45
|
|
|
Decrease (increase) in other assets
|
|
1,421
|
|
|
2,456
|
|
|
5,407
|
|
|
(Decrease) increase in accrued interest payable
|
|
(538
|
)
|
|
(678
|
)
|
|
(61,745
|
)
|
|
(Decrease) increase in other liabilities
|
|
(6,487
|
)
|
|
11,469
|
|
|
2,677
|
|
|
Net cash provided by operating activities
|
|
310,862
|
|
|
194,868
|
|
|
324,706
|
|
|
Cash flows from investing activities, net of business and asset acquisitions:
|
|
|
|
|
|
|
|
|
||
Originations and purchases of student loans, including loan premiums and deferred origination costs, net of discounts
|
|
(976,837
|
)
|
|
(3,137,210
|
)
|
|
(2,776,557
|
)
|
|
Purchases of student loans from a related party
|
|
(112
|
)
|
|
(989,168
|
)
|
|
(47,621
|
)
|
|
Net proceeds from student loan repayments, claims, capitalized interest, participations, and other
|
|
2,235,719
|
|
|
1,821,589
|
|
|
1,873,666
|
|
|
Proceeds from sale of student loans
|
|
121,344
|
|
|
2,202,427
|
|
|
2,317,093
|
|
|
Proceeds from sale of student loans to a related party
|
|
—
|
|
|
—
|
|
|
76,448
|
|
|
Purchases of property and equipment, net
|
|
(14,167
|
)
|
|
(12,770
|
)
|
|
(1,204
|
)
|
|
Decrease (increase) in restricted cash and investments, net
|
|
87,905
|
|
|
(43,265
|
)
|
|
371,780
|
|
|
Business and asset acquisitions, net of cash acquired, including contingency payments
|
|
(14,029
|
)
|
|
(3,000
|
)
|
|
—
|
|
|
Distribution from equity method investment
|
|
—
|
|
|
100
|
|
|
—
|
|
|
Net cash provided by (used in) investing activities
|
|
1,439,823
|
|
|
(161,297
|
)
|
|
1,813,605
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
||
Payments on bonds and notes payable
|
|
(2,938,613
|
)
|
|
(5,564,844
|
)
|
|
(6,644,250
|
)
|
|
Proceeds from issuance of bonds and notes payable
|
|
1,100,384
|
|
|
5,452,290
|
|
|
4,688,404
|
|
|
Payments on bonds payable due to a related party
|
|
(107,050
|
)
|
|
(111,675
|
)
|
|
(21,520
|
)
|
|
Proceeds from issuance of bonds payable due to a related party
|
|
—
|
|
|
218,725
|
|
|
—
|
|
|
Payments of debt issuance costs
|
|
(2,282
|
)
|
|
(9,318
|
)
|
|
(9,239
|
)
|
|
Dividends paid
|
|
(17,763
|
)
|
|
(34,131
|
)
|
|
(3,492
|
)
|
|
Repurchases of common stock
|
|
(27,134
|
)
|
|
(39,805
|
)
|
|
(430
|
)
|
|
Proceeds from issuance of common stock
|
|
512
|
|
|
528
|
|
|
449
|
|
|
Payments received on employee stock notes receivable
|
|
30
|
|
|
279
|
|
|
101
|
|
|
Net cash used in financing activities
|
|
(1,991,916
|
)
|
|
(87,951
|
)
|
|
(1,989,977
|
)
|
|
Net (decrease) increase in cash and cash equivalents
|
|
(241,231
|
)
|
|
(54,380
|
)
|
|
148,334
|
|
|
Cash and cash equivalents, beginning of year
|
|
283,801
|
|
|
338,181
|
|
|
189,847
|
|
|
Cash and cash equivalents, end of year
|
|
$
|
42,570
|
|
|
283,801
|
|
|
338,181
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
||
Interest paid
|
|
$
|
206,117
|
|
|
224,837
|
|
|
434,834
|
|
Income taxes paid, net of refunds
|
|
$
|
133,180
|
|
|
105,955
|
|
|
101,491
|
|
1.
|
Description of Business
|
•
|
Servicing FFELP loans
|
•
|
Originating and servicing non-federally insured student loans
|
•
|
Servicing federally-owned student loans for the Department of Education
|
•
|
Servicing and outsourcing services for guaranty agencies
|
•
|
Providing student loan servicing software and other information technology products and services
|
2.
|
Summary of Significant Accounting Policies and Practices
|
•
|
Reclassifying “software services revenue” to “loan and guaranty servicing revenue."
|
•
|
Reclassifying “professional and other services,” “occupancy and communications,” “postage and distribution,” “advertising and marketing,” and “trustee and other debt related fees” to “other” operating expenses.
|
•
|
Reclassifying student list amortization, which was previously included in “advertising and marketing” to “depreciation and amortization.”
|
•
|
Level 1: Quoted prices for
identical
instruments in active markets. The types of financial instruments included in Level 1 are highly liquid instruments with quoted prices.
|
•
|
Level 2: Quoted prices for
similar
instruments in active markets, quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose primary value drivers are observable.
|
•
|
Level 3: Instruments whose primary value drivers are
unobservable
. Inputs are developed based on the best information available; however, significant judgment is required by management in developing the inputs.
|
•
|
Loan and guaranty servicing fees
– Loan servicing fees are determined according to individual agreements with customers and are calculated based on the dollar value of loans, number of loans, or number of borrowers serviced for each customer. Guaranty servicing fees, generally, are calculated based on the number of loans serviced, volume of loans serviced, or amounts collected. Revenue is recognized when earned pursuant to applicable agreements, and when ultimate collection is assured.
|
•
|
Software services revenue
– Software services revenue is determined from individual agreements with customers and includes license and maintenance fees associated with student loan software products. Computer and software consulting and remote hosting revenues are recognized over the period in which services are provided to customers.
|
•
|
Interactive marketing
- Interactive marketing revenue is derived primarily from fees which are earned through the delivery of qualified inquiries or clicks. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is reasonably assured. Delivery is deemed to have occurred at the time a qualified inquiry or click is delivered to the customer provided that no significant obligations remain. From time to time, the Company may agree to credit certain inquiries or clicks if they fail to meet the contractual or other guidelines of a particular client. The Company has established a sales reserve based on historical experience. To date, such credits have been immaterial and within management's expectations.
|
•
|
List marketing
- Revenue from the sale of lists is generally earned and recognized, net of estimated returns, upon delivery.
|
•
|
Publishing services -
Revenue from the sale of print products is generally earned and recognized, net of estimated returns, upon shipment or delivery.
|
•
|
Resource centers -
Resource centers services include online courses, scholarship search and selection data, career planning, and online information about colleges and universities. The majority of these services are sold based on subscriptions and/or are performance based. Revenues from sales of subscription and performance based services are recognized ratably over the term of the contract as earned. Subscription and performance based revenues received or receivable in advance of the delivery of services is included in deferred revenue.
|
•
|
Management, having the authority to approve the action, commits to a plan of termination;
|
•
|
The plan of termination identifies the number of employees to be terminated, their job classifications or functions, and their locations and the expected completion date;
|
•
|
The plan of termination establishes the terms of the benefit arrangement, including the benefits that employees will receive upon termination, in sufficient detail to enable employees to determine the type and amount of benefits they will receive if they are involuntarily terminated; and
|
•
|
Actions required to complete the plan of termination indicate that it is unlikely that significant changes to the plan of termination will be made or that the plan of termination will be withdrawn.
|
|
As of December 31,
|
||||||||
|
2011
|
|
2010
|
||||||
|
Held for investment
|
|
Held for investment
|
|
Held for sale (a)
|
||||
Federally insured loans
|
$
|
24,332,709
|
|
|
23,757,699
|
|
|
—
|
|
Non-federally insured loans
|
26,916
|
|
|
26,370
|
|
|
84,987
|
|
|
|
24,359,625
|
|
|
23,784,069
|
|
|
84,987
|
|
|
Unamortized loan premiums/discounts and deferred origination costs, net
|
(13,267
|
)
|
|
207,571
|
|
|
—
|
|
|
Allowance for loan losses – federally insured loans
|
(37,205
|
)
|
|
(32,908
|
)
|
|
—
|
|
|
Allowance for loan losses – non-federally insured loans
|
(11,277
|
)
|
|
(10,718
|
)
|
|
—
|
|
|
|
$
|
24,297,876
|
|
|
23,948,014
|
|
|
84,987
|
|
Allowance for federally insured loans as a percentage of such loans
|
0.15
|
%
|
|
0.14
|
%
|
|
|
|
|
Allowance for non-federally insured loans as a percentage of such loans
|
41.90
|
%
|
|
40.64
|
%
|
|
|
|
(a)
|
On January 13, 2011, the Company sold a portfolio of non-federally insured loans for proceeds of
$91.3 million
(100% of par value). The Company retained credit risk related to this portfolio and will pay cash to purchase back any loans which become 60 days delinquent. As of December 31, 2010, the Company classified this portfolio as held for sale and the loans were carried at fair value.
|
|
Year ended December 31,
|
||||||||
|
2011
|
|
2010
|
|
2009
|
||||
Balance at beginning of period
|
$
|
43,626
|
|
|
50,887
|
|
|
50,922
|
|
Provision for loan losses:
|
|
|
|
|
|
||||
Federally insured loans
|
20,000
|
|
|
18,700
|
|
|
20,000
|
|
|
Non-federally insured loans
|
1,250
|
|
|
4,000
|
|
|
9,000
|
|
|
Total provision for loan losses
|
21,250
|
|
|
22,700
|
|
|
29,000
|
|
|
Charge-offs:
|
|
|
|
|
|
|
|
||
Federally insured loans
|
(17,166
|
)
|
|
(18,603
|
)
|
|
(14,954
|
)
|
|
Non-federally insured loans
|
(4,147
|
)
|
|
(7,282
|
)
|
|
(5,304
|
)
|
|
Total charge-offs
|
(21,313
|
)
|
|
(25,885
|
)
|
|
(20,258
|
)
|
|
|
|
|
|
|
|
|
|
||
Recoveries - non-federally insured loans
|
1,310
|
|
|
1,263
|
|
|
1,543
|
|
|
Purchase (sale) of loans, net:
|
|
|
|
|
|
||||
Federally insured loans
|
1,463
|
|
|
2,710
|
|
|
(520
|
)
|
|
Non-federally insured loans
|
—
|
|
|
220
|
|
|
—
|
|
|
Reserve related to loans reclassified to held for sale
|
—
|
|
|
(6,269
|
)
|
|
—
|
|
|
Transfer to/from repurchase obligation related to loans sold/purchased, net
|
2,146
|
|
|
(2,000
|
)
|
|
(9,800
|
)
|
|
Balance at end of period
|
$
|
48,482
|
|
|
43,626
|
|
|
50,887
|
|
|
|
|
|
|
|
||||
Allocation of the allowance for loan losses:
|
|
|
|
|
|
|
|
||
Federally insured loans
|
$
|
37,205
|
|
|
32,908
|
|
|
30,102
|
|
Non-federally insured loans
|
11,277
|
|
|
10,718
|
|
|
20,785
|
|
|
Total allowance for loan losses
|
$
|
48,482
|
|
|
43,626
|
|
|
50,887
|
|
|
Year ended December 31,
|
||||||||
|
2011
|
|
2010
|
|
2009
|
||||
Beginning balance
|
$
|
12,600
|
|
|
10,600
|
|
|
—
|
|
Repurchase obligation transferred to/from the allowance for loan losses related to loans purchased/sold, net
|
(2,146
|
)
|
|
2,000
|
|
|
9,800
|
|
|
Repurchase obligation associated with loans sold (a)
|
6,269
|
|
|
—
|
|
|
—
|
|
|
Current period expense
|
2,500
|
|
|
—
|
|
|
800
|
|
|
Ending balance
|
$
|
19,223
|
|
|
12,600
|
|
|
10,600
|
|
(a)
|
As discussed previously, on January 13, 2011, the Company sold a portfolio of loans and retained all credit risk related to this portfolio. These loans were classified as held for sale as of December 31, 2010 and the loans were carried at fair value. Upon sale, the Company established a repurchase obligation associated with those loans that are estimated to become 60 days delinquent.
|
|
As of December 31,
|
||||||||||||
|
2011
|
|
2010
|
||||||||||
|
Dollars
|
|
Percent
|
|
Dollars
|
|
Percent
|
||||||
Federally Insured Loans:
|
|
|
|
|
|
|
|
||||||
Loans in-school/grace/deferment (a)
|
$
|
3,664,899
|
|
|
|
|
$
|
4,358,616
|
|
|
|
||
Loans in forbearance (b)
|
3,330,452
|
|
|
|
|
2,984,869
|
|
|
|
||||
Loans in repayment status:
|
|
|
|
|
|
|
|
||||||
Loans current
|
14,600,372
|
|
|
84.2
|
%
|
|
14,309,480
|
|
|
87.2
|
%
|
||
Loans delinquent 31-60 days (c)
|
844,204
|
|
|
4.9
|
|
|
794,140
|
|
|
4.8
|
|
||
Loans delinquent 61-90 days (c)
|
407,094
|
|
|
2.3
|
|
|
306,853
|
|
|
1.9
|
|
||
Loans delinquent 91-270 days (c)
|
1,163,437
|
|
|
6.7
|
|
|
789,795
|
|
|
4.8
|
|
||
Loans delinquent 271 days or greater (c)(d)
|
322,251
|
|
|
1.9
|
|
|
213,946
|
|
|
1.3
|
|
||
Total loans in repayment
|
17,337,358
|
|
|
100.0
|
%
|
|
16,414,214
|
|
|
100.0
|
%
|
||
Total federally insured loans
|
$
|
24,332,709
|
|
|
|
|
|
$
|
23,757,699
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Non-Federally Insured Loans:
|
|
|
|
|
|
|
|
|
|
|
|
||
Loans in-school/grace/deferment (a)
|
$
|
2,058
|
|
|
|
|
|
$
|
3,500
|
|
|
|
|
Loans in forbearance (b)
|
371
|
|
|
|
|
|
292
|
|
|
|
|
||
Loans in repayment status:
|
|
|
|
|
|
|
|
|
|
||||
Loans current
|
16,776
|
|
|
68.5
|
%
|
|
16,679
|
|
|
73.9
|
%
|
||
Loans delinquent 31-60 days (c)
|
706
|
|
|
2.9
|
|
|
1,546
|
|
|
6.8
|
|
||
Loans delinquent 61-90 days (c)
|
1,987
|
|
|
8.1
|
|
|
1,163
|
|
|
5.2
|
|
||
Loans delinquent 91 days or greater (c)
|
5,018
|
|
|
20.5
|
|
|
3,190
|
|
|
14.1
|
|
||
Total loans in repayment
|
24,487
|
|
|
100.0
|
%
|
|
22,578
|
|
|
100.0
|
%
|
||
Total non-federally insured loans
|
$
|
26,916
|
|
|
|
|
|
$
|
26,370
|
|
|
|
|
(a)
|
Loans for borrowers who still may be attending school or engaging in other permitted educational activities and are not yet required to make payments on the loans,
e.g.
, residency periods for medical students or a grace period for bar exam preparation for law students.
|
(b)
|
Loans for borrowers who have temporarily ceased making full payments due to hardship or other factors, according to a schedule approved by the servicer consistent with the established loan program servicing procedures and policies.
|
(c)
|
The period of delinquency is based on the number of days scheduled payments are contractually past due and relate to repayment loans, that is, receivables not charged off, and not in school, grace, deferment, or forbearance.
|
(d)
|
A portion of loans included in loans delinquent 271 days or greater include federally insured loans in claim status, which are loans that have gone into default and have been submitted to the guaranty agency.
|
|
As of December 31, 2011
|
||||||
|
Carrying
amount
|
|
Interest rate
range
|
|
Final maturity
|
||
Variable-rate bonds and notes (a):
|
|
|
|
|
|
||
Bonds and notes based on indices
|
$
|
20,252,403
|
|
|
0.42% - 6.90%
|
|
11/25/15 - 7/27/48
|
Bonds and notes based on auction or remarketing
|
970,575
|
|
|
0.11% - 2.19%
|
|
5/1/28 - 5/25/42
|
|
Total variable-rate bonds and notes
|
21,222,978
|
|
|
|
|
|
|
Commercial paper - FFELP warehouse facilities
|
824,410
|
|
|
0.26% - 0.70%
|
|
7/1/14
|
|
Department of Education Conduit
|
2,339,575
|
|
|
0.24%
|
|
5/8/14
|
|
Unsecured line of credit
|
64,390
|
|
|
0.69%
|
|
5/8/12
|
|
Unsecured debt - Junior Subordinated Hybrid Securities
|
100,697
|
|
|
3.95%
|
|
9/15/61
|
|
Other borrowings
|
43,119
|
|
|
3.78% - 5.72%
|
|
11/14/12 - 3/1/22
|
|
|
24,595,169
|
|
|
|
|
|
|
Discount on bonds and notes payable
|
(160,629
|
)
|
|
|
|
|
|
Total
|
$
|
24,434,540
|
|
|
|
|
|
|
As of December 31, 2010
|
||||||
|
Carrying
amount
|
|
Interest rate
range
|
|
Final maturity
|
||
Variable-rate bonds and notes (a):
|
|
|
|
|
|
||
Bonds and notes based on indices
|
$
|
20,170,217
|
|
|
0.30% - 6.90%
|
|
5/26/14 - 7/27/48
|
Bonds and notes based on auction or remarketing
|
944,560
|
|
|
0.24% - 1.51%
|
|
5/1/11 - 7/1/43
|
|
Total variable-rate bonds and notes
|
21,114,777
|
|
|
|
|
|
|
Commercial paper - FFELP warehouse facility
|
108,381
|
|
|
0.29% - 0.35%
|
|
7/29/13
|
|
Department of Education Conduit
|
2,702,345
|
|
|
0.31%
|
|
5/8/14
|
|
Unsecured line of credit
|
450,000
|
|
|
0.79%
|
|
5/8/12
|
|
Unsecured debt - Junior Subordinated Hybrid Securities
|
163,255
|
|
|
7.40%
|
|
9/15/61
|
|
Related party debt
|
107,050
|
|
|
0.53%
|
|
5/20/11
|
|
Other borrowings
|
26,664
|
|
|
0.26% - 5.10%
|
|
1/1/11 - 11/1/15
|
|
|
$
|
24,672,472
|
|
|
|
|
|
(a)
|
Issued in asset-backed securitizations
|
•
|
A minimum consolidated net worth
|
•
|
A minimum adjusted EBITDA to recourse indebtedness (over the last four rolling quarters)
|
•
|
A limitation on recourse indebtedness
|
•
|
A limitation on the percentage of non-federally insured loans in the Company’s portfolio
|
2012
|
|
$
|
8,900
|
|
2013
|
|
—
|
|
|
2014
|
|
3,163,985
|
|
|
2015
|
|
209,172
|
|
|
2016
|
|
105,163
|
|
|
2017 and thereafter
|
|
21,107,949
|
|
|
|
|
$
|
24,595,169
|
|
|
Year ended December 31,
|
||||||||
|
2011
|
|
2010
|
|
2009
|
||||
Gain on sale of loans, net (a)
|
$
|
1,378
|
|
|
33,748
|
|
|
35,148
|
|
Gain from debt repurchases (b)
|
6,962
|
|
|
44,883
|
|
|
41,683
|
|
|
|
$
|
8,340
|
|
|
78,631
|
|
|
76,831
|
|
(a)
|
The majority of gains from the sale of loans included in the table above were the result of selling loans to the Department under a program established to provide liquidity to student loan lenders. During each of 2010 and 2009, the Company sold $2.1 billion (par value) of student loans to the Department and recognized a gain of $33.8 million and $36.6 million, respectively.
|
(b)
|
The activity included in "Gain from debt repurchases" is detailed below:
|
|
Year ended December 31, 2011
|
|
Year ended December 31, 2010
|
|
Year ended December 31, 2009
|
||||||||||||||||||||||
|
Notional
amount
|
|
Purchase
price
|
|
Gain
|
|
Notional
amount
|
|
Purchase
price
|
|
Gain
|
|
Notional
amount
|
|
Purchase
price
|
|
Gain
|
||||||||||
Gains on debt repurchases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Unsecured debt - Senior Notes due 2010
|
$
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
208,284
|
|
|
196,529
|
|
|
11,755
|
|
Junior Subordinated Hybrid Securities
|
62,558
|
|
|
55,651
|
|
|
6,907
|
|
|
34,995
|
|
|
30,073
|
|
|
4,922
|
|
|
1,750
|
|
|
350
|
|
|
1,400
|
|
|
Asset-backed securities (1)
|
12,254
|
|
|
12,199
|
|
|
55
|
|
|
690,750
|
|
|
650,789
|
|
|
39,961
|
|
|
348,155
|
|
|
319,627
|
|
|
28,528
|
|
|
|
$
|
74,812
|
|
|
67,850
|
|
|
6,962
|
|
|
725,745
|
|
|
680,862
|
|
|
44,883
|
|
|
558,189
|
|
|
516,506
|
|
|
41,683
|
|
(1)
|
For accounting purposes, the asset-backed securities repurchased by the Company are effectively retired and are not included on the Company’s consolidated balance sheets. However, as of
December 31, 2011
, the Company has purchased a cumulative amount of
$72.5 million
of these securities that remain legally outstanding at the trust level and the Company could sell these notes to third parties or redeem the notes at par as cash is generated by the trust estate. Upon a sale to third parties, the Company would obtain cash proceeds equal to the market value of the notes on the date of such sale. The par value of these notes (
$72.5 million
as of
December 31, 2011
) may not represent market value of such securities.
|
•
|
receives three-month LIBOR set discretely in advance and pays a daily weighted average three-month LIBOR less a spread as defined in the agreements (the “Average/Discrete Basis Swaps”)
|
•
|
receives three-month LIBOR set discretely in advance and pays one-month LIBOR plus or minus a spread as defined in the agreements (the “1/3 Basis Swaps”)
|
|
|
|
As of December 31, 2011
|
|||||
|
|
|
Notional amounts
|
|||||
Maturity
|
|
1:3 Basis Swaps
|
|
T-Bill/LIBOR
Basis Swaps
|
||||
2021
|
|
|
$
|
250,000
|
|
|
—
|
|
2023
|
|
|
1,250,000
|
|
|
—
|
|
|
2024
|
|
|
250,000
|
|
|
—
|
|
|
2026
|
|
|
800,000
|
|
|
—
|
|
|
2028
|
|
|
100,000
|
|
|
—
|
|
|
2036
|
|
|
700,000
|
|
|
—
|
|
|
2039
|
(a)
|
|
150,000
|
|
|
—
|
|
|
2040
|
(b)
|
|
200,000
|
|
|
—
|
|
|
|
|
|
$
|
3,700,000
|
|
|
—
|
|
|
|
As of December 31, 2011
|
|||||
|
|
Notional
|
|
Weighted average fixed rate paid by the Company (a)
|
|||
Maturity
|
|
amount
|
|
||||
2013
|
|
$
|
2,150,000
|
|
|
0.85
|
%
|
2014
|
|
750,000
|
|
|
0.85
|
|
|
2015
|
|
100,000
|
|
|
2.26
|
|
|
2020
|
|
50,000
|
|
|
3.23
|
|
|
|
|
$
|
3,050,000
|
|
|
0.87
|
%
|
|
|
As of December 31, 2010
|
|||||
|
|
Notional
|
|
Weighted average fixed rate paid by the Company (a)
|
|||
Maturity
|
|
amount
|
|
||||
2011
|
|
$
|
4,300,000
|
|
|
0.53
|
%
|
2012
|
|
3,950,000
|
|
|
0.67
|
|
|
2013
|
|
650,000
|
|
|
1.07
|
|
|
2015
|
|
100,000
|
|
|
2.26
|
|
|
2020
|
|
50,000
|
|
|
3.23
|
|
|
|
|
$
|
9,050,000
|
|
|
0.66
|
%
|
As of December 31, 2011
|
|||||
Notional amount (a)
|
|
Weighted average fixed rate paid by the Company (b)
|
|||
$
|
75,000
|
|
|
4.28
|
%
|
|
|
|
|||
As of December 31, 2010
|
|||||
Notional amount (a)
|
|
Weighted average fixed rate paid by the Company (b)
|
|||
$
|
100,000
|
|
|
4.27
|
%
|
(a)
|
The effective start date on
$75 million
(notional amount) of the derivatives outstanding is March 2012 with a maturity date of September 29, 2036.
|
(b)
|
For all interest rate derivatives, the Company receives discrete three-month LIBOR.
|
|
Year ended December 31,
|
||||||||
|
2011
|
|
2010
|
|
2009
|
||||
Re-measurement of Euro Notes
|
$
|
32,706
|
|
|
80,721
|
|
|
(37,654
|
)
|
Change in fair value of cross currency interest rate swaps
|
(14,287
|
)
|
|
(74,899
|
)
|
|
2,497
|
|
|
Total impact to statements of income - income (expense)
|
$
|
18,419
|
|
|
5,822
|
|
|
(35,157
|
)
|
|
Fair value of asset derivatives
|
|
Fair value of liability derivatives
|
|||||||||
|
As of
|
|
As of
|
|
As of
|
|
As of
|
|||||
|
December 31, 2011
|
|
December 31, 2010
|
|
December 31, 2011
|
|
December 31, 2010
|
|||||
Average/discrete basis swaps
|
$
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
1:3 basis swaps
|
10,988
|
|
|
10,489
|
|
|
641
|
|
|
44
|
|
|
T-Bill/LIBOR basis swaps
|
—
|
|
|
—
|
|
|
—
|
|
|
201
|
|
|
Interest rate swaps - floor income hedges
|
592
|
|
|
10,569
|
|
|
18,384
|
|
|
15,372
|
|
|
Interest rate swaps - hybrid debt hedges
|
—
|
|
|
1,132
|
|
|
24,814
|
|
|
470
|
|
|
Cross-currency interest rate swaps
|
80,631
|
|
|
94,918
|
|
|
—
|
|
|
—
|
|
|
Other
|
8
|
|
|
1,238
|
|
|
1
|
|
|
2
|
|
|
Total
|
$
|
92,219
|
|
|
118,346
|
|
|
43,840
|
|
|
16,089
|
|
|
|
Year ended December 31,
|
||||||||
Derivatives not designated as hedging
|
|
2011
|
|
2010
|
|
2009
|
||||
Settlements:
|
|
|
|
|
|
|
|
|
||
Average/discrete basis swaps
|
|
$
|
—
|
|
|
140
|
|
|
11,483
|
|
1:3 basis swaps
|
|
1,446
|
|
|
1,194
|
|
|
21,231
|
|
|
T-Bill/LIBOR basis swaps
|
|
(253
|
)
|
|
(47
|
)
|
|
—
|
|
|
Interest rate swaps - floor income hedges
|
|
(20,246
|
)
|
|
(19,618
|
)
|
|
(2,020
|
)
|
|
Interest rate swaps - hybrid debt hedges
|
|
(744
|
)
|
|
(495
|
)
|
|
—
|
|
|
Cross-currency interest rate swaps
|
|
11,877
|
|
|
5,109
|
|
|
8,631
|
|
|
Other
|
|
80
|
|
|
(547
|
)
|
|
(39
|
)
|
|
Total settlements - (expense) income
|
|
(7,840
|
)
|
|
(14,264
|
)
|
|
39,286
|
|
|
Change in fair value:
|
|
|
|
|
|
|
|
|
|
|
Average/discrete basis swaps
|
|
(148
|
)
|
|
406
|
|
|
(13,647
|
)
|
|
1:3 basis swaps
|
|
1,114
|
|
|
6,133
|
|
|
12,587
|
|
|
T-Bill/LIBOR basis swaps
|
|
201
|
|
|
(101
|
)
|
|
(101
|
)
|
|
Interest rate swaps - floor income hedges
|
|
(12,169
|
)
|
|
(8,992
|
)
|
|
2,267
|
|
|
Interest rate swaps - hybrid debt hedges
|
|
(25,475
|
)
|
|
(301
|
)
|
|
1,817
|
|
|
Cross-currency interest rate swaps
|
|
(14,287
|
)
|
|
(74,899
|
)
|
|
2,497
|
|
|
Other
|
|
251
|
|
|
620
|
|
|
1,432
|
|
|
Total change in fair value - (expense) income
|
|
(50,513
|
)
|
|
(77,134
|
)
|
|
6,852
|
|
|
Re-measurement of Euro Notes (foreign currency transaction adjustment) - (expense) income
|
|
32,706
|
|
|
80,721
|
|
|
(37,654
|
)
|
|
Derivative market value and foreign currency adjustments and derivative settlements, net - (expense) income
|
|
$
|
(25,647
|
)
|
|
(10,677
|
)
|
|
8,484
|
|
|
As of December 31,
|
|||||
|
2011
|
|
2010
|
|||
Investments:
|
|
|
|
|||
Investments - trading securities (a)
|
|
|
|
|||
Student loan auction rate asset-backed securities
|
$
|
42,412
|
|
|
11,861
|
|
Equity securities
|
6,847
|
|
|
6,250
|
|
|
Debt securities (b)
|
1,521
|
|
|
25,125
|
|
|
Total investments - trading securities
|
$
|
50,780
|
|
|
43,236
|
|
|
|
|
|
|||
Restricted Investments (c):
|
|
|
|
|||
Guaranteed investment contracts - held-to-maturity
|
$
|
236,899
|
|
|
215,009
|
|
(a)
|
The unrealized gain/loss on the Company's trading securities as of
December 31, 2011
and
2010
was not significant.
|
(b)
|
Debt securities include corporate, mortgage-backed security, and U.S. government bonds and U.S. Treasury securities.
|
(c)
|
Restricted investments are included in "Restricted cash and investments" on the Company's consolidated balance sheets.
|
|
Weighted
average remaining useful life as of December 31, 2011 (months) |
|
As of December 31,
|
||||||
|
|
2011
|
|
2010
|
|||||
Amortizable intangible assets:
|
|
|
|
||||||
Customer relationships (net of accumulated amortization of $59,893 and $47,770, respectively)
|
63
|
|
|
$
|
23,240
|
|
|
28,576
|
|
Computer software (net of accumulated amortization of $5,103 and $2,419, respectively)
|
12
|
|
|
2,815
|
|
|
5,499
|
|
|
Trade names (net of accumulated amortization of $9,274 and $6,956, respectively)
|
12
|
|
|
2,319
|
|
|
4,637
|
|
|
Total - amortizable intangible assets
|
54
|
|
|
$
|
28,374
|
|
|
38,712
|
|
2012
|
$
|
18,632
|
|
2013
|
3,399
|
|
|
2014
|
2,102
|
|
|
2015
|
829
|
|
|
2016
|
639
|
|
|
2017 and thereafter
|
2,773
|
|
|
|
$
|
28,374
|
|
|
Student Loan and Guaranty Servicing
|
|
Tuition Payment Processing and Campus Commerce
|
|
Enrollment Services
|
|
Asset Generation and Management (a)
|
|
Total
|
||||||
Balance as of December 31, 2008
|
$
|
8,596
|
|
|
58,086
|
|
|
66,613
|
|
|
41,883
|
|
|
175,178
|
|
Impairment charge
|
—
|
|
|
—
|
|
|
(31,461
|
)
|
|
—
|
|
|
(31,461
|
)
|
|
Balance as of December 31, 2009
|
8,596
|
|
|
58,086
|
|
|
35,152
|
|
|
41,883
|
|
|
143,717
|
|
|
Impairment charge
|
—
|
|
|
—
|
|
|
(26,599
|
)
|
|
—
|
|
|
(26,599
|
)
|
|
Balance as of December 31, 2010 and 2011
|
$
|
8,596
|
|
|
58,086
|
|
|
8,553
|
|
|
41,883
|
|
|
117,118
|
|
(a)
|
As a result of the Reconciliation Act of 2010, the Company no longer originates new (first disbursement) FFELP loans and net interest income of the Company's existing FFELP loan portfolio will decline over time as the Company's portfolio pays down. As a result, as this revenue stream winds down, goodwill impairment will be triggered for the Asset Generation and Management reporting unit due to the passage of time and depletion of projected cash flows stemming from its FFELP student loan portfolio. Other than the Asset Generation and Management reporting unit, management believes the elimination of FFELP will not have an adverse impact on the fair value of the Company's other reporting units.
|
|
|
|
As of December 31,
|
|||||
|
Useful life
|
|
2011
|
|
2010
|
|||
Computer equipment and software
|
1-5 years
|
|
$
|
79,895
|
|
|
78,929
|
|
Office furniture and equipment
|
3-7 years
|
|
10,607
|
|
|
10,481
|
|
|
Leasehold improvements
|
1-15 years
|
|
7,321
|
|
|
8,037
|
|
|
Transportation equipment
|
3-10 years
|
|
3,766
|
|
|
3,766
|
|
|
Buildings
|
5-39 years
|
|
9,144
|
|
|
8,490
|
|
|
Land
|
—
|
|
700
|
|
|
700
|
|
|
|
|
|
111,433
|
|
|
110,403
|
|
|
Accumulated depreciation
|
|
|
76,614
|
|
|
79,830
|
|
|
|
|
|
$
|
34,819
|
|
|
30,573
|
|
|
|
Total shares repurchased
|
|
Purchase price (in thousands)
|
|
Average price of shares repurchased (per share)
|
|||||
Year ended December 31, 2011
|
|
1,436,423
|
|
|
$
|
27,134
|
|
|
$
|
18.89
|
|
Year ended December 31, 2010
|
|
1,866,332
|
|
|
39,805
|
|
|
21.33
|
|
||
Year ended December 31, 2009
|
|
38,429
|
|
|
430
|
|
|
11.16
|
|
|
Year ended December 31,
|
||||||||
|
2011
|
|
2010
|
|
2009
|
||||
Net income attributable to Nelnet, Inc.
|
$
|
204,335
|
|
|
189,034
|
|
|
139,125
|
|
Less earnings allocated to holders of unvested restricted stock
|
1,263
|
|
|
1,218
|
|
|
889
|
|
|
Net income available to common stockholders
|
$
|
203,072
|
|
|
187,816
|
|
|
138,236
|
|
Weighted average common shares outstanding - basic
|
47,860,824
|
|
|
49,127,934
|
|
|
49,484,816
|
|
|
Dilutive effect of the assumed vesting of restricted stock awards
|
186,845
|
|
|
198,752
|
|
|
200,327
|
|
|
Weighted average common shares outstanding - diluted
|
48,047,669
|
|
|
49,326,686
|
|
|
49,685,143
|
|
|
Basic earnings per common share
|
$
|
4.24
|
|
|
3.82
|
|
|
2.79
|
|
Diluted earnings per common share
|
$
|
4.23
|
|
|
3.81
|
|
|
2.78
|
|
|
Year ended December 31,
|
|||||
|
2011
|
|
2010
|
|||
Gross balance - beginning of year
|
$
|
10,546
|
|
|
8,629
|
|
Additions based on tax positions of prior years
|
7,898
|
|
|
401
|
|
|
Additions based on tax positions related to the current year
|
4,359
|
|
|
2,383
|
|
|
Settlements with taxing authorities
|
—
|
|
|
—
|
|
|
Reductions for tax positions of prior years
|
(417
|
)
|
|
(750
|
)
|
|
Reductions based on tax positions related to the current year
|
—
|
|
|
—
|
|
|
Reductions due to lapse of applicable statute of limitations
|
(592
|
)
|
|
(117
|
)
|
|
Gross balance - end of year
|
$
|
21,794
|
|
|
10,546
|
|
|
Year ended December 31,
|
||||||||
|
2011
|
|
2010
|
|
2009
|
||||
Current:
|
|
|
|
|
|
||||
Federal
|
$
|
123,737
|
|
|
102,162
|
|
|
88,413
|
|
State
|
1,354
|
|
|
6,827
|
|
|
7,194
|
|
|
Foreign
|
87
|
|
|
158
|
|
|
23
|
|
|
Total current provision
|
125,178
|
|
|
109,147
|
|
|
95,630
|
|
|
|
|
|
|
|
|
||||
Deferred:
|
|
|
|
|
|
||||
Federal
|
(6,606
|
)
|
|
272
|
|
|
(15,947
|
)
|
|
State
|
(1,116
|
)
|
|
4,009
|
|
|
(3,111
|
)
|
|
Foreign
|
(4
|
)
|
|
(8
|
)
|
|
1
|
|
|
Total deferred (benefit) provision
|
(7,726
|
)
|
|
4,273
|
|
|
(19,057
|
)
|
|
Provision for income tax expense
|
$
|
117,452
|
|
|
113,420
|
|
|
76,573
|
|
|
Year ended December 31,
|
|||||||
|
2011
|
|
2010
|
|
2009
|
|||
Tax expense at federal rate
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
Increase (decrease) resulting from:
|
|
|
|
|
|
|||
State tax, net of federal income tax benefit
|
0.9
|
|
|
2.2
|
|
|
1.9
|
|
Provision of uncertain federal and state tax matters
|
1.1
|
|
|
0.4
|
|
|
—
|
|
Tax credits
|
(0.4)
|
|
|
(0.2)
|
|
|
(0.4)
|
|
Valuation allowance
|
(0.3)
|
|
|
0.1
|
|
|
(0.6)
|
|
Other
|
0.2
|
|
|
—
|
|
|
(0.4)
|
|
Effective tax rate
|
36.5
|
%
|
|
37.5
|
%
|
|
35.5
|
%
|
|
As of December 31,
|
|||||
|
2011
|
|
2010
|
|||
Deferred tax assets:
|
|
|
|
|||
Student loans
|
$
|
23,605
|
|
|
21,413
|
|
Intangible assets
|
23,476
|
|
|
20,578
|
|
|
Accrued expenses
|
3,282
|
|
|
4,981
|
|
|
Net operating loss carryforwards
|
680
|
|
|
2,081
|
|
|
Stock compensation
|
867
|
|
|
899
|
|
|
Deferred revenue
|
2,625
|
|
|
734
|
|
|
Foreign tax credit
|
397
|
|
|
721
|
|
|
Bond issuance costs
|
656
|
|
|
667
|
|
|
Other
|
—
|
|
|
55
|
|
|
Total gross deferred tax assets
|
55,588
|
|
|
52,129
|
|
|
Less valuation allowance
|
(250
|
)
|
|
(1,161
|
)
|
|
Deferred tax assets
|
55,338
|
|
|
50,968
|
|
|
Deferred tax liabilities:
|
|
|
|
|||
Loan origination services
|
31,576
|
|
|
36,878
|
|
|
Debt repurchases
|
30,637
|
|
|
33,391
|
|
|
Basis in certain derivative contracts
|
4,420
|
|
|
10,644
|
|
|
Depreciation
|
5,819
|
|
|
2,215
|
|
|
Other
|
454
|
|
|
53
|
|
|
Deferred tax liabilities
|
72,906
|
|
|
83,181
|
|
|
Net deferred income tax liability
|
$
|
17,568
|
|
|
32,213
|
|
|
2009 Restructuring Plan
|
|
2008 Restructuring Plan (a)
|
|
2007 Restructuring Plan (b)
|
|
|
||||||||
|
Employee termination benefits
|
|
Lease terminations
|
|
Lease terminations
|
|
Lease terminations
|
|
Total
|
||||||
Restructuring accrual as of December 31, 2008
|
$
|
—
|
|
|
—
|
|
|
589
|
|
|
2,891
|
|
|
3,480
|
|
Restructuring costs recognized in 2009
|
4,247
|
|
|
3,031
|
|
|
—
|
|
|
—
|
|
|
7,278
|
|
|
Adjustment from initial estimate of charges
|
—
|
|
|
—
|
|
|
12
|
|
|
692
|
|
|
704
|
|
|
Cash payments
|
(898
|
)
|
|
(605
|
)
|
|
(250
|
)
|
|
(650
|
)
|
|
(2,403
|
)
|
|
Restructuring accrual as of December 31, 2009
|
3,349
|
|
|
2,426
|
|
|
351
|
|
|
2,933
|
|
|
9,059
|
|
|
Restructuring costs recognized in 2010
|
1,069
|
|
|
3,360
|
|
|
—
|
|
|
—
|
|
|
4,429
|
|
|
Adjustment from initial estimate of charges
|
—
|
|
|
—
|
|
|
—
|
|
|
1,639
|
|
|
1,639
|
|
|
Cash payments
|
(3,380
|
)
|
|
(2,332
|
)
|
|
(128
|
)
|
|
(1,207
|
)
|
|
(7,047
|
)
|
|
Restructuring accrual as of December 31, 2010
|
1,038
|
|
|
3,454
|
|
|
223
|
|
|
3,365
|
|
|
8,080
|
|
|
Cash payments
|
(683
|
)
|
|
(1,387
|
)
|
|
(223
|
)
|
|
(1,541
|
)
|
|
(3,834
|
)
|
|
Restructuring accrual as of December 31, 2011
|
$
|
355
|
|
|
2,067
|
|
|
—
|
|
|
1,824
|
|
|
4,246
|
|
(a)
|
During, 2008, the Company announced a plan to reduce operating expenses related to its student loan origination and related businesses as a result of ongoing disruptions in the credit markets. This restructuring plan was completed during the second quarter of 2008.
|
(b)
|
During 2007, the Company initiated a restructuring plan to modify its student loan business model in advance of the enactment of the College Cost Reduction Act, which impacted the FFEL Program. This restructuring plan was completed as of December 31, 2007.
|
•
|
Income earned on certain investment activities
|
•
|
Interest expense incurred on unsecured debt transactions
|
•
|
Other products and service offerings that are not considered operating segments
|
|
Year ended December 31, 2011
|
|||||||||||||||||||||||||||||
|
Fee-Based
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Student
Loan
and
Guaranty
Servicing
|
|
Tuition
Payment
Processing
and
Campus
Commerce
|
|
Enrollment
Services
|
|
Total Fee-
Based
|
|
Asset
Generation and
Management
|
|
Corporate
Activity
and
Overhead
|
|
Eliminations
|
|
Base Net
Income
|
|
Adjustments
to GAAP
Results
|
|
GAAP
Results of
Operations
|
|||||||||||
Total interest income
|
$
|
58
|
|
|
21
|
|
|
—
|
|
|
79
|
|
|
590,736
|
|
|
5,074
|
|
|
(3,035
|
)
|
|
592,854
|
|
|
—
|
|
|
592,854
|
|
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
221,675
|
|
|
9,649
|
|
|
(3,035
|
)
|
|
228,289
|
|
|
—
|
|
|
228,289
|
|
|
Net interest income (loss)
|
58
|
|
|
21
|
|
|
—
|
|
|
79
|
|
|
369,061
|
|
|
(4,575
|
)
|
|
—
|
|
|
364,565
|
|
|
—
|
|
|
364,565
|
|
|
Less provision for loan losses
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21,250
|
|
|
—
|
|
|
—
|
|
|
21,250
|
|
|
—
|
|
|
21,250
|
|
|
Net interest income (loss) after provision for loan losses
|
58
|
|
|
21
|
|
|
—
|
|
|
79
|
|
|
347,811
|
|
|
(4,575
|
)
|
|
—
|
|
|
343,315
|
|
|
—
|
|
|
343,315
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan and guaranty servicing revenue
|
175,657
|
|
|
—
|
|
|
—
|
|
|
175,657
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
175,657
|
|
|
—
|
|
|
175,657
|
|
|
Intersegment servicing revenue
|
69,037
|
|
|
—
|
|
|
—
|
|
|
69,037
|
|
|
—
|
|
|
—
|
|
|
(69,037
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Tuition payment processing and campus commerce revenue
|
—
|
|
|
67,797
|
|
|
—
|
|
|
67,797
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
67,797
|
|
|
—
|
|
|
67,797
|
|
|
Enrollment services revenue
|
—
|
|
|
—
|
|
|
130,470
|
|
|
130,470
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
130,470
|
|
|
—
|
|
|
130,470
|
|
|
Other income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,416
|
|
|
14,097
|
|
|
—
|
|
|
29,513
|
|
|
—
|
|
|
29,513
|
|
|
Gain on sale of loans and debt repurchases
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,433
|
|
|
6,907
|
|
|
—
|
|
|
8,340
|
|
|
—
|
|
|
8,340
|
|
|
Derivative market value and foreign currency adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17,807
|
)
|
|
(17,807
|
)
|
|
Derivative settlements, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,228
|
)
|
|
(612
|
)
|
|
—
|
|
|
(7,840
|
)
|
|
—
|
|
|
(7,840
|
)
|
|
Total other income (expense)
|
244,694
|
|
|
67,797
|
|
|
130,470
|
|
|
442,961
|
|
|
9,621
|
|
|
20,392
|
|
|
(69,037
|
)
|
|
403,937
|
|
|
(17,807
|
)
|
|
386,130
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
102,878
|
|
|
30,070
|
|
|
25,155
|
|
|
158,103
|
|
|
2,791
|
|
|
17,057
|
|
|
—
|
|
|
177,951
|
|
|
—
|
|
|
177,951
|
|
|
Cost to provide enrollment services
|
—
|
|
|
—
|
|
|
86,548
|
|
|
86,548
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
86,548
|
|
|
—
|
|
|
86,548
|
|
|
Depreciation and amortization
|
6,843
|
|
|
1,174
|
|
|
3,204
|
|
|
11,221
|
|
|
—
|
|
|
1,398
|
|
|
—
|
|
|
12,619
|
|
|
17,125
|
|
|
29,744
|
|
|
Other
|
60,442
|
|
|
10,192
|
|
|
9,425
|
|
|
80,059
|
|
|
13,381
|
|
|
19,975
|
|
|
—
|
|
|
113,415
|
|
|
—
|
|
|
113,415
|
|
|
Intersegment expenses, net
|
4,776
|
|
|
4,714
|
|
|
3,521
|
|
|
13,011
|
|
|
70,018
|
|
|
(13,992
|
)
|
|
(69,037
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total operating expenses
|
174,939
|
|
|
46,150
|
|
|
127,853
|
|
|
348,942
|
|
|
86,190
|
|
|
24,438
|
|
|
(69,037
|
)
|
|
390,533
|
|
|
17,125
|
|
|
407,658
|
|
|
Income (loss) before income taxes and corporate overhead allocation
|
69,813
|
|
|
21,668
|
|
|
2,617
|
|
|
94,098
|
|
|
271,242
|
|
|
(8,621
|
)
|
|
—
|
|
|
356,719
|
|
|
(34,932
|
)
|
|
321,787
|
|
|
Corporate overhead allocation
|
(4,138
|
)
|
|
(1,379
|
)
|
|
(1,379
|
)
|
|
(6,896
|
)
|
|
(6,896
|
)
|
|
13,792
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Income (loss) before income taxes
|
65,675
|
|
|
20,289
|
|
|
1,238
|
|
|
87,202
|
|
|
264,346
|
|
|
5,171
|
|
|
—
|
|
|
356,719
|
|
|
(34,932
|
)
|
|
321,787
|
|
|
Income tax (expense) benefit
|
(24,955
|
)
|
|
(7,709
|
)
|
|
(471
|
)
|
|
(33,135
|
)
|
|
(100,451
|
)
|
|
2,860
|
|
|
—
|
|
|
(130,726
|
)
|
|
13,274
|
|
|
(117,452
|
)
|
|
Net income (loss)
|
$
|
40,720
|
|
|
12,580
|
|
|
767
|
|
|
54,067
|
|
|
163,895
|
|
|
8,031
|
|
|
—
|
|
|
225,993
|
|
|
(21,658
|
)
|
|
204,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total assets
|
$
|
123,307
|
|
|
157,444
|
|
|
45,738
|
|
|
326,489
|
|
|
25,821,806
|
|
|
24,735
|
|
|
(320,813
|
)
|
|
25,852,217
|
|
|
—
|
|
|
25,852,217
|
|
|
Year ended December 31, 2010
|
|||||||||||||||||||||||||||||
|
Fee-Based
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Student
Loan
and
Guaranty
Servicing
|
|
Tuition
Payment
Processing
and
Campus
Commerce
|
|
Enrollment
Services
|
|
Total Fee-Based
|
|
Asset
Generation
and
Management
|
|
Corporate
Activity
and
Overhead
|
|
Eliminations
|
|
Base Net
Income
|
|
Adjustments
to GAAP
Results
|
|
GAAP
Results of
Operations
|
|||||||||||
Total interest income
|
$
|
62
|
|
|
32
|
|
|
—
|
|
|
94
|
|
|
600,098
|
|
|
8,109
|
|
|
(4,370
|
)
|
|
603,931
|
|
|
—
|
|
|
603,931
|
|
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
215,339
|
|
|
21,891
|
|
|
(4,370
|
)
|
|
232,860
|
|
|
—
|
|
|
232,860
|
|
|
Net interest income (loss)
|
62
|
|
|
32
|
|
|
—
|
|
|
94
|
|
|
384,759
|
|
|
(13,782
|
)
|
|
—
|
|
|
371,071
|
|
|
—
|
|
|
371,071
|
|
|
Less provision for loan losses
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
22,700
|
|
|
—
|
|
|
—
|
|
|
22,700
|
|
|
—
|
|
|
22,700
|
|
|
Net interest income (loss) after provision for loan losses
|
62
|
|
|
32
|
|
|
—
|
|
|
94
|
|
|
362,059
|
|
|
(13,782
|
)
|
|
—
|
|
|
348,371
|
|
|
—
|
|
|
348,371
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan and guaranty servicing revenue
|
158,838
|
|
|
—
|
|
|
—
|
|
|
158,838
|
|
|
—
|
|
|
(254
|
)
|
|
—
|
|
|
158,584
|
|
|
—
|
|
|
158,584
|
|
|
Intersegment servicing revenue
|
85,342
|
|
|
—
|
|
|
—
|
|
|
85,342
|
|
|
—
|
|
|
|
|
|
(85,342
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Tuition payment processing and campus commerce revenue
|
—
|
|
|
59,824
|
|
|
—
|
|
|
59,824
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
59,824
|
|
|
—
|
|
|
59,824
|
|
|
Enrollment services revenue
|
—
|
|
|
—
|
|
|
139,897
|
|
|
139,897
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
139,897
|
|
|
—
|
|
|
139,897
|
|
|
Other income
|
519
|
|
|
—
|
|
|
—
|
|
|
519
|
|
|
18,639
|
|
|
12,152
|
|
|
—
|
|
|
31,310
|
|
|
—
|
|
|
31,310
|
|
|
Gain on sale of loans and debt repurchases
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
73,709
|
|
|
4,922
|
|
|
—
|
|
|
78,631
|
|
|
—
|
|
|
78,631
|
|
|
Derivative market value and foreign currency adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,587
|
|
|
3,587
|
|
|
Derivative settlements, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13,336
|
)
|
|
(928
|
)
|
|
—
|
|
|
(14,264
|
)
|
|
—
|
|
|
(14,264
|
)
|
|
Total other income (expense)
|
244,699
|
|
|
59,824
|
|
|
139,897
|
|
|
444,420
|
|
|
79,012
|
|
|
15,892
|
|
|
(85,342
|
)
|
|
453,982
|
|
|
3,587
|
|
|
457,569
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
95,293
|
|
|
27,180
|
|
|
24,827
|
|
|
147,300
|
|
|
4,524
|
|
|
15,849
|
|
|
(1,662
|
)
|
|
166,011
|
|
|
—
|
|
|
166,011
|
|
|
Cost to provide enrollment services
|
—
|
|
|
—
|
|
|
91,647
|
|
|
91,647
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
91,647
|
|
|
—
|
|
|
91,647
|
|
|
Depreciation and amortization
|
5,179
|
|
|
1,333
|
|
|
7,359
|
|
|
13,871
|
|
|
3
|
|
|
1,826
|
|
|
—
|
|
|
15,700
|
|
|
22,744
|
|
|
38,444
|
|
|
Impairment expense
|
—
|
|
|
—
|
|
|
26,599
|
|
|
26,599
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
26,599
|
|
|
—
|
|
|
26,599
|
|
|
Restructure expense
|
6,040
|
|
|
—
|
|
|
—
|
|
|
6,040
|
|
|
—
|
|
|
(20
|
)
|
|
—
|
|
|
6,020
|
|
|
—
|
|
|
6,020
|
|
|
Litigation settlement
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
55,000
|
|
|
—
|
|
|
55,000
|
|
|
—
|
|
|
55,000
|
|
|
Other
|
60,061
|
|
|
9,531
|
|
|
10,681
|
|
|
80,273
|
|
|
12,749
|
|
|
26,743
|
|
|
—
|
|
|
119,765
|
|
|
—
|
|
|
119,765
|
|
|
Intersegment expenses, net
|
5,221
|
|
|
3,579
|
|
|
2,461
|
|
|
11,261
|
|
|
85,278
|
|
|
(12,859
|
)
|
|
(83,680
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total operating expenses
|
171,794
|
|
|
41,623
|
|
|
163,574
|
|
|
376,991
|
|
|
102,554
|
|
|
86,539
|
|
|
(85,342
|
)
|
|
480,742
|
|
|
22,744
|
|
|
503,486
|
|
|
Income (loss) before income taxes and corporate overhead allocation
|
72,967
|
|
|
18,233
|
|
|
(23,677
|
)
|
|
67,523
|
|
|
338,517
|
|
|
(84,429
|
)
|
|
—
|
|
|
321,611
|
|
|
(19,157
|
)
|
|
302,454
|
|
|
Corporate overhead allocation
|
(5,856
|
)
|
|
(1,952
|
)
|
|
(1,952
|
)
|
|
(9,760
|
)
|
|
(9,759
|
)
|
|
19,519
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Income (loss) before income taxes
|
67,111
|
|
|
16,281
|
|
|
(25,629
|
)
|
|
57,763
|
|
|
328,758
|
|
|
(64,910
|
)
|
|
—
|
|
|
321,611
|
|
|
(19,157
|
)
|
|
302,454
|
|
|
Income tax (expense) benefit
|
(25,502
|
)
|
|
(6,189
|
)
|
|
9,740
|
|
|
(21,951
|
)
|
|
(124,928
|
)
|
|
26,179
|
|
|
—
|
|
|
(120,700
|
)
|
|
7,280
|
|
|
(113,420
|
)
|
|
Net income (loss)
|
$
|
41,609
|
|
|
10,092
|
|
|
(15,889
|
)
|
|
35,812
|
|
|
203,830
|
|
|
(38,731
|
)
|
|
—
|
|
|
200,911
|
|
|
(11,877
|
)
|
|
189,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Additional information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$
|
41,609
|
|
|
10,092
|
|
|
(15,889
|
)
|
|
35,812
|
|
|
203,830
|
|
|
(38,731
|
)
|
|
—
|
|
|
200,911
|
|
|
|
|
|
||
Plus: Litigation settlement
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
55,000
|
|
|
—
|
|
|
55,000
|
|
|
|
|
|
|||
Plus: Restructure expense
|
6,040
|
|
|
—
|
|
|
—
|
|
|
6,040
|
|
|
—
|
|
|
(20
|
)
|
|
—
|
|
|
6,020
|
|
|
|
|
|
|||
Plus: Impairment expense
|
—
|
|
|
—
|
|
|
26,599
|
|
|
26,599
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
26,599
|
|
|
|
|
|
|||
Less: Net tax effect
|
(2,295
|
)
|
|
—
|
|
|
(10,108
|
)
|
|
(12,403
|
)
|
|
—
|
|
|
(20,892
|
)
|
|
—
|
|
|
(33,295
|
)
|
|
|
|
|
|||
Net income (loss), excluding litigation settlement, restructure expense, and impairment expense
|
$
|
45,354
|
|
|
10,092
|
|
|
602
|
|
|
56,048
|
|
|
203,830
|
|
|
(4,643
|
)
|
|
—
|
|
|
255,235
|
|
|
|
|
|
||
Total assets
|
$
|
133,103
|
|
|
121,817
|
|
|
52,999
|
|
|
307,919
|
|
|
26,008,867
|
|
|
11,970
|
|
|
(434,864
|
)
|
|
25,893,892
|
|
|
—
|
|
|
25,893,892
|
|
|
Year ended December 31, 2009
|
|||||||||||||||||||||||||||||
|
Fee-Based
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Student
Loan
and
Guaranty
Servicing
|
|
Tuition
Payment
Processing
and
Campus
Commerce
|
|
Enrollment
Services
|
|
Total Fee-
Based
|
|
Asset
Generation and
Management
|
|
Corporate
Activity
and
Overhead
|
|
Eliminations
|
|
Base Net
Income
|
|
Adjustments
to GAAP
Results
|
|
GAAP
Results of
Operations
|
|||||||||||
Total interest income
|
$
|
112
|
|
|
62
|
|
|
—
|
|
|
174
|
|
|
609,143
|
|
|
5,391
|
|
|
(2,003
|
)
|
|
612,705
|
|
|
7,502
|
|
|
620,207
|
|
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
357,930
|
|
|
28,935
|
|
|
(2,003
|
)
|
|
384,862
|
|
|
—
|
|
|
384,862
|
|
|
Net interest income (loss)
|
112
|
|
|
62
|
|
|
—
|
|
|
174
|
|
|
251,213
|
|
|
(23,544
|
)
|
|
—
|
|
|
227,843
|
|
|
7,502
|
|
|
235,345
|
|
|
Less provision for loan losses
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29,000
|
|
|
—
|
|
|
—
|
|
|
29,000
|
|
|
—
|
|
|
29,000
|
|
|
Net interest income (loss) after provision for loan losses
|
112
|
|
|
62
|
|
|
—
|
|
|
174
|
|
|
222,213
|
|
|
(23,544
|
)
|
|
—
|
|
|
198,843
|
|
|
7,502
|
|
|
206,345
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan and guaranty servicing revenue
|
131,437
|
|
|
—
|
|
|
—
|
|
|
131,437
|
|
|
—
|
|
|
(1,526
|
)
|
|
—
|
|
|
129,911
|
|
|
—
|
|
|
129,911
|
|
|
Intersegment servicing revenue
|
85,048
|
|
|
—
|
|
|
—
|
|
|
85,048
|
|
|
—
|
|
|
—
|
|
|
(85,048
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Tuition payment processing and campus commerce revenue
|
—
|
|
|
53,894
|
|
|
—
|
|
|
53,894
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
53,894
|
|
|
—
|
|
|
53,894
|
|
|
Enrollment services revenue
|
—
|
|
|
—
|
|
|
119,397
|
|
|
119,397
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
119,397
|
|
|
—
|
|
|
119,397
|
|
|
Other income
|
644
|
|
|
—
|
|
|
—
|
|
|
644
|
|
|
17,169
|
|
|
8,656
|
|
|
—
|
|
|
26,469
|
|
|
—
|
|
|
26,469
|
|
|
Gain on sale of loans and debt repurchases
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
63,676
|
|
|
13,155
|
|
|
—
|
|
|
76,831
|
|
|
—
|
|
|
76,831
|
|
|
Derivative market value and foreign currency adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(30,802
|
)
|
|
(30,802
|
)
|
|
Derivative settlements, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
39,286
|
|
|
—
|
|
|
—
|
|
|
39,286
|
|
|
—
|
|
|
39,286
|
|
|
Total other income (expense)
|
217,129
|
|
|
53,894
|
|
|
119,397
|
|
|
390,420
|
|
|
120,131
|
|
|
20,285
|
|
|
(85,048
|
)
|
|
445,788
|
|
|
(30,802
|
)
|
|
414,986
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
84,405
|
|
|
25,549
|
|
|
23,222
|
|
|
133,176
|
|
|
6,767
|
|
|
16,639
|
|
|
(5,456
|
)
|
|
151,126
|
|
|
159
|
|
|
151,285
|
|
|
Cost to provide enrollment services
|
—
|
|
|
—
|
|
|
74,926
|
|
|
74,926
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
74,926
|
|
|
—
|
|
|
74,926
|
|
|
Depreciation and amortization
|
9,025
|
|
|
1,484
|
|
|
3,959
|
|
|
14,468
|
|
|
9
|
|
|
1,770
|
|
|
—
|
|
|
16,247
|
|
|
22,249
|
|
|
38,496
|
|
|
Impairment expense
|
—
|
|
|
—
|
|
|
32,728
|
|
|
32,728
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
32,728
|
|
|
—
|
|
|
32,728
|
|
|
Restructure expense
|
7,715
|
|
|
—
|
|
|
—
|
|
|
7,715
|
|
|
—
|
|
|
267
|
|
|
—
|
|
|
7,982
|
|
|
—
|
|
|
7,982
|
|
|
Other
|
41,708
|
|
|
8,158
|
|
|
9,267
|
|
|
59,133
|
|
|
19,557
|
|
|
21,526
|
|
|
—
|
|
|
100,216
|
|
|
—
|
|
|
100,216
|
|
|
Intersegment expenses, net
|
4,299
|
|
|
2,563
|
|
|
1,566
|
|
|
8,428
|
|
|
81,335
|
|
|
(10,171
|
)
|
|
(79,592
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total operating expenses
|
147,152
|
|
|
37,754
|
|
|
145,668
|
|
|
330,574
|
|
|
107,668
|
|
|
30,031
|
|
|
(85,048
|
)
|
|
383,225
|
|
|
22,408
|
|
|
405,633
|
|
|
Income (loss) before income taxes and corporate overhead allocation
|
70,089
|
|
|
16,202
|
|
|
(26,271
|
)
|
|
60,020
|
|
|
234,676
|
|
|
(33,290
|
)
|
|
—
|
|
|
261,406
|
|
|
(45,708
|
)
|
|
215,698
|
|
|
Corporate overhead allocation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Income (loss) before income taxes
|
70,089
|
|
|
16,202
|
|
|
(26,271
|
)
|
|
60,020
|
|
|
234,676
|
|
|
(33,290
|
)
|
|
—
|
|
|
261,406
|
|
|
(45,708
|
)
|
|
215,698
|
|
|
Income tax (expense) benefit
|
(26,636
|
)
|
|
(6,156
|
)
|
|
9,984
|
|
|
(22,808
|
)
|
|
(89,178
|
)
|
|
19,186
|
|
|
—
|
|
|
(92,800
|
)
|
|
16,227
|
|
|
(76,573
|
)
|
|
Net income (loss)
|
$
|
43,453
|
|
|
10,046
|
|
|
(16,287
|
)
|
|
37,212
|
|
|
145,498
|
|
|
(14,104
|
)
|
|
—
|
|
|
168,606
|
|
|
(29,481
|
)
|
|
139,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Additional information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss)
|
$
|
43,453
|
|
|
10,046
|
|
|
(16,287
|
)
|
|
37,212
|
|
|
145,498
|
|
|
(14,104
|
)
|
|
—
|
|
|
168,606
|
|
|
|
|
|
||
Plus: Restructure expense
|
7,715
|
|
|
—
|
|
|
—
|
|
|
7,715
|
|
|
—
|
|
|
267
|
|
|
—
|
|
|
7,982
|
|
|
|
|
|
|||
Plus: Impairment expense
|
—
|
|
|
—
|
|
|
32,728
|
|
|
32,728
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
32,728
|
|
|
|
|
|
|||
Less: Net tax effect
|
(2,932
|
)
|
|
—
|
|
|
(12,437
|
)
|
|
(15,369
|
)
|
|
—
|
|
|
917
|
|
|
—
|
|
|
(14,452
|
)
|
|
|
|
|
|||
Net income (loss), excluding restructure and impairment expense
|
$
|
48,236
|
|
|
10,046
|
|
|
4,004
|
|
|
62,286
|
|
|
145,498
|
|
|
(12,920
|
)
|
|
—
|
|
|
194,864
|
|
|
|
|
|
||
Total assets
|
$
|
146,530
|
|
|
114,581
|
|
|
76,140
|
|
|
337,251
|
|
|
25,899,946
|
|
|
12,201
|
|
|
(372,971
|
)
|
|
25,876,427
|
|
|
—
|
|
|
25,876,427
|
|
|
Student
Loan
and
Guaranty
Servicing
|
|
Tuition
Payment
Processing
and Campus
Commerce
|
|
Enrollment
Services
|
|
Asset
Generation
and
Management
|
|
Corporate
Activity
and
Overhead
|
|
Total
|
|||||||
|
Year ended December 31, 2011
|
|||||||||||||||||
Derivative market value and foreign currency adjustments (a)
|
$
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,571
|
)
|
|
25,378
|
|
|
17,807
|
|
Amortization of intangible assets (b)
|
8,470
|
|
|
5,005
|
|
|
3,650
|
|
|
—
|
|
|
—
|
|
|
17,125
|
|
|
Compensation related to business combinations (c)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Variable-rate floor income, net of settlements on derivatives (d)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Net tax effect (e)
|
(3,219
|
)
|
|
(1,902
|
)
|
|
(1,387
|
)
|
|
2,877
|
|
|
(9,643
|
)
|
|
(13,274
|
)
|
|
Total adjustments to GAAP
|
$
|
5,251
|
|
|
3,103
|
|
|
2,263
|
|
|
(4,694
|
)
|
|
15,735
|
|
|
21,658
|
|
|
Year ended December 31, 2010
|
|||||||||||||||||
Derivative market value and foreign currency adjustments (a)
|
$
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,046
|
)
|
|
(541
|
)
|
|
(3,587
|
)
|
Amortization of intangible assets (b)
|
8,576
|
|
|
5,756
|
|
|
8,412
|
|
|
—
|
|
|
—
|
|
|
22,744
|
|
|
Compensation related to business combinations (c)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Variable-rate floor income, net of settlements on derivatives (d)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Net tax effect (e)
|
(3,259
|
)
|
|
(2,189
|
)
|
|
(3,199
|
)
|
|
1,157
|
|
|
210
|
|
|
(7,280
|
)
|
|
Total adjustments to GAAP
|
$
|
5,317
|
|
|
3,567
|
|
|
5,213
|
|
|
(1,889
|
)
|
|
(331
|
)
|
|
11,877
|
|
|
Year ended December 31, 2009
|
|||||||||||||||||
Derivative market value and foreign currency adjustments (a)
|
$
|
—
|
|
|
—
|
|
|
—
|
|
|
34,569
|
|
|
(3,767
|
)
|
|
30,802
|
|
Amortization of intangible assets (b)
|
4,848
|
|
|
7,440
|
|
|
9,961
|
|
|
—
|
|
|
—
|
|
|
22,249
|
|
|
Compensation related to business combinations (c)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
159
|
|
|
159
|
|
|
Variable-rate floor income, net of settlements on derivatives (d)
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,502
|
)
|
|
—
|
|
|
(7,502
|
)
|
|
Net tax effect (e)
|
(1,842
|
)
|
|
(2,827
|
)
|
|
(3,787
|
)
|
|
(10,285
|
)
|
|
2,514
|
|
|
(16,227
|
)
|
|
Total adjustments to GAAP
|
$
|
3,006
|
|
|
4,613
|
|
|
6,174
|
|
|
16,782
|
|
|
(1,094
|
)
|
|
29,481
|
|
(a)
|
Derivative market value and foreign currency adjustments: “Base net income” excludes the periodic unrealized gains and losses that are caused by the change in fair value on derivatives used in the Company’s risk management strategy in which the Company does not qualify for “hedge treatment” under GAAP. Included in “base net income” are the economic effects of the Company’s derivative instruments, which includes any cash paid or received being recognized as an expense or revenue upon actual derivative settlements. “Base net income” also excludes the foreign currency transaction gains or losses caused by the re-measurement of the Company’s Euro-denominated bonds to U.S. dollars.
|
(b)
|
Amortization of intangible assets: “Base net income” excludes the amortization of acquired intangibles.
|
(c)
|
Compensation related to business combinations: The Company has structured certain business combinations in which the consideration paid has been dependent on the sellers' continued employment with the Company. As such, the value
|
(d)
|
Variable-rate floor income: Loans that reset annually on July 1 can generate excess spread income compared with the rate based on the special allowance payment formula in declining interest rate environments. The Company refers to this additional income as variable-rate floor income. The Company excludes variable-rate floor income, net of settlements paid on derivatives used to hedge student loan assets earning variable-rate floor income, from its “base net income” since the timing and amount of variable-rate floor income (if any) is uncertain, it has been eliminated by legislation for all loans originated on and after April 1, 2006, and it is in excess of expected spreads. In addition, because variable-rate floor income is subject to the underlying rate for the subject loans being reset annually on July 1, it is a factor beyond the Company's control which can affect the period-to-period comparability of results of operations.
|
(e)
|
Income taxes are applied based on 38% for the individual operating segments.
|
2012
|
$
|
6,787
|
|
2013
|
5,708
|
|
|
2014
|
3,399
|
|
|
2015
|
1,656
|
|
|
2016 and thereafter
|
1,664
|
|
|
|
$
|
19,214
|
|
|
Years ended December 31,
|
|||||||
|
2011
|
|
2010
|
|
2009
|
|||
Non-vested shares at beginning of year
|
311,119
|
|
|
320,461
|
|
|
329,173
|
|
Granted
|
82,845
|
|
|
96,327
|
|
|
72,471
|
|
Vested
|
(54,184
|
)
|
|
(48,523
|
)
|
|
(43,873
|
)
|
Canceled
|
(54,062
|
)
|
|
(57,146
|
)
|
|
(37,310
|
)
|
Non-vested shares at end of year
|
285,718
|
|
|
311,119
|
|
|
320,461
|
|
2012
|
$
|
952
|
|
2013
|
680
|
|
|
2014
|
491
|
|
|
2015
|
349
|
|
|
2016
|
235
|
|
|
2017 and thereafter
|
304
|
|
|
|
$
|
3,011
|
|
|
Shares issued - not deferred
|
|
Shares issued - deferred
|
|
Total
|
|||
Year ended December 31, 2011
|
13,059
|
|
|
20,843
|
|
|
33,902
|
|
Year ended December 31, 2010
|
14,632
|
|
|
12,466
|
|
|
27,098
|
|
Year ended December 31, 2009
|
7,143
|
|
|
36,078
|
|
|
43,221
|
|
19.
|
Related Parties
|
|
As of December 31, 2011
|
|||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|||||
Assets:
|
|
|
|
|
|
|
|
|||||
Investments - trading securities (a):
|
|
|
|
|
|
|
|
|||||
Student loan auction rate asset-backed securities
|
$
|
—
|
|
|
42,412
|
|
|
—
|
|
|
42,412
|
|
Equity securities
|
6,847
|
|
|
—
|
|
|
—
|
|
|
6,847
|
|
|
Debt securities
|
1,521
|
|
|
—
|
|
|
—
|
|
|
1,521
|
|
|
Total investments - trading securities
|
8,368
|
|
|
42,412
|
|
|
—
|
|
|
50,780
|
|
|
Fair value of derivative instruments (b)
|
—
|
|
|
92,219
|
|
|
—
|
|
|
92,219
|
|
|
Total assets
|
$
|
8,368
|
|
|
134,631
|
|
|
—
|
|
|
142,999
|
|
Liabilities:
|
|
|
|
|
|
|
|
|||||
Fair value of derivative instruments (b):
|
$
|
—
|
|
|
43,840
|
|
|
—
|
|
|
43,840
|
|
Total liabilities
|
$
|
—
|
|
|
43,840
|
|
|
—
|
|
|
43,840
|
|
|
|
|
|
|
|
|
|
|||||
|
As of December 31, 2010
|
|||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
||
Investments - trading securities (a)
|
|
|
|
|
|
|
|
|||||
Student loan auction rate asset-backed securities
|
$
|
—
|
|
|
—
|
|
|
11,861
|
|
|
11,861
|
|
Equity securities
|
6,250
|
|
|
—
|
|
|
—
|
|
|
6,250
|
|
|
Debt securities
|
25,125
|
|
|
—
|
|
|
—
|
|
|
25,125
|
|
|
Total investments - trading securities
|
31,375
|
|
|
—
|
|
|
11,861
|
|
|
43,236
|
|
|
Fair value of derivative instruments (b)
|
—
|
|
|
118,346
|
|
|
—
|
|
|
118,346
|
|
|
Total assets
|
$
|
31,375
|
|
|
118,346
|
|
|
11,861
|
|
|
161,582
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
||
Fair value of derivative instruments (b)
|
$
|
—
|
|
|
16,089
|
|
|
—
|
|
|
16,089
|
|
Total liabilities
|
$
|
—
|
|
|
16,089
|
|
|
—
|
|
|
16,089
|
|
(a)
|
Investments represent investments classified by the Company as trading securities which are recorded at fair value on a recurring basis. Level 1 investments are measured based upon quoted prices and include investments traded on an active exchange, such as the New York Stock Exchange, as well as corporate, mortgage-backed security, and U.S. government bonds and U.S. Treasury securities that trade in active markets. Level 2 and level 3 investments include student loan auction rate asset-backed securities. The fair value for the student loan auction rate asset-backed securities is determined using indicative quotes from broker dealers or an income approach valuation technique (present value using the discount rate adjustment technique) that considers, among other things, rates currently observed in publicly traded debt markets for debt of similar terms to companies with comparable credit risk.
|
(b)
|
All derivatives are accounted for at fair value on a recurring basis. The fair value of derivative financial instruments is determined using a market approach in which derivative pricing models use the stated terms of the contracts and observable yield curves, forward foreign currency exchange rates, and volatilities from active markets.
|
|
|
Level 3
|
||
Balance at December 31, 2009
|
|
$
|
—
|
|
Total realized and unrealized gains (losses) included in income, net (a)
|
|
150
|
|
|
Purchases
|
|
12,061
|
|
|
Redemptions/Sales
|
|
(350
|
)
|
|
Balance at December 31, 2010
|
|
11,861
|
|
|
Total realized and unrealized gains (losses) included in income, net (a)
|
|
(78
|
)
|
|
Purchases
|
|
93,823
|
|
|
Redemptions/Sales
|
|
(63,194
|
)
|
|
Transfers out of level 3 (b)
|
|
(42,412
|
)
|
|
Balance at December 31, 2011
|
|
$
|
—
|
|
|
|
|
|
Level 3
|
||||||||
|
2011
|
|
2010
|
|
2009
|
||||
Goodwill (a)
|
$
|
117,118
|
|
|
117,118
|
|
|
143,717
|
|
Intangible assets (b)
|
28,374
|
|
|
38,712
|
|
|
53,538
|
|
|
|
$
|
145,492
|
|
|
155,830
|
|
|
197,255
|
|
(a)
|
Goodwill is reviewed annually for impairment and whenever triggering events or changes in circumstances indicate its carrying value may not be recoverable.
|
(b)
|
Long-lived assets, such as purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
|
|
As of December 31, 2011
|
|
As of December 31, 2010
|
|||||||||
|
Fair value
|
|
Carrying value
|
|
Fair value
|
|
Carrying value
|
|||||
Financial assets:
|
|
|
|
|
|
|
|
|||||
Student loans receivable
|
$
|
23,894,005
|
|
|
24,297,876
|
|
|
24,836,538
|
|
|
23,948,014
|
|
Student loans receivable - held for sale
|
—
|
|
|
—
|
|
|
84,987
|
|
|
84,987
|
|
|
Cash and cash equivalents
|
42,570
|
|
|
42,570
|
|
|
283,801
|
|
|
283,801
|
|
|
Investments
|
50,780
|
|
|
50,780
|
|
|
43,236
|
|
|
43,236
|
|
|
Restricted cash
|
377,423
|
|
|
377,423
|
|
|
453,748
|
|
|
453,748
|
|
|
Restricted cash – due to customers
|
109,809
|
|
|
109,809
|
|
|
88,528
|
|
|
88,528
|
|
|
Restricted investments
|
236,899
|
|
|
236,899
|
|
|
215,009
|
|
|
215,009
|
|
|
Accrued interest receivable
|
308,401
|
|
|
308,401
|
|
|
318,152
|
|
|
318,152
|
|
|
Derivative instruments
|
92,219
|
|
|
92,219
|
|
|
118,346
|
|
|
118,346
|
|
|
|
|
|
|
|
|
|
|
|||||
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonds and notes payable
|
23,003,453
|
|
|
24,434,540
|
|
|
24,651,191
|
|
|
24,672,472
|
|
|
Accrued interest payable
|
19,634
|
|
|
19,634
|
|
|
19,153
|
|
|
19,153
|
|
|
Due to customers
|
109,809
|
|
|
109,809
|
|
|
88,528
|
|
|
88,528
|
|
|
Derivative instruments
|
43,840
|
|
|
43,840
|
|
|
16,089
|
|
|
16,089
|
|
|
2011
|
|||||||||||
|
First quarter
|
|
Second quarter
|
|
Third quarter
|
|
Fourth quarter
|
|||||
Net interest income
|
$
|
85,777
|
|
|
88,736
|
|
|
96,761
|
|
|
93,291
|
|
Less provision for loan losses
|
3,750
|
|
|
5,250
|
|
|
5,250
|
|
|
7,000
|
|
|
Net interest income after provision for loan losses
|
82,027
|
|
|
83,486
|
|
|
91,511
|
|
|
86,291
|
|
|
Loan and guaranty servicing revenue
|
40,413
|
|
|
41,735
|
|
|
42,549
|
|
|
50,960
|
|
|
Tuition payment processing and campus commerce revenue
|
19,369
|
|
|
14,761
|
|
|
16,774
|
|
|
16,893
|
|
|
Enrollment services revenue
|
33,868
|
|
|
32,315
|
|
|
35,505
|
|
|
28,782
|
|
|
Other income
|
6,492
|
|
|
6,826
|
|
|
3,931
|
|
|
12,264
|
|
|
Gain on sale of loans and debt repurchases, net
|
8,307
|
|
|
—
|
|
|
—
|
|
|
33
|
|
|
Derivative market value and foreign currency adjustments and derivative settlements, net
|
(3,036
|
)
|
|
(20,335
|
)
|
|
(13,631
|
)
|
|
11,355
|
|
|
Salaries and benefits
|
(43,912
|
)
|
|
(42,881
|
)
|
|
(44,132
|
)
|
|
(47,026
|
)
|
|
Cost to provide enrollment services
|
(22,839
|
)
|
|
(22,140
|
)
|
|
(23,825
|
)
|
|
(17,744
|
)
|
|
Depreciation and amortization
|
(6,776
|
)
|
|
(6,769
|
)
|
|
(7,917
|
)
|
|
(8,282
|
)
|
|
Operating expenses - other
|
(26,105
|
)
|
|
(28,767
|
)
|
|
(28,904
|
)
|
|
(29,639
|
)
|
|
Income tax expense
|
(32,928
|
)
|
|
(21,106
|
)
|
|
(24,410
|
)
|
|
(39,008
|
)
|
|
Net income
|
$
|
54,880
|
|
|
37,125
|
|
|
47,451
|
|
|
64,879
|
|
Earnings per common share - basic
|
$
|
1.13
|
|
|
0.76
|
|
|
0.98
|
|
|
1.37
|
|
Earnings per common share - dilutive
|
$
|
1.13
|
|
|
0.76
|
|
|
0.98
|
|
|
1.37
|
|
|
2010
|
|||||||||||
|
First quarter
|
|
Second quarter
|
|
Third quarter
|
|
Fourth quarter
|
|||||
Net interest income
|
$
|
85,109
|
|
|
97,414
|
|
|
92,213
|
|
|
96,335
|
|
Less provision for loan losses
|
5,000
|
|
|
6,200
|
|
|
5,500
|
|
|
6,000
|
|
|
Net interest income after provision for loan losses
|
80,109
|
|
|
91,214
|
|
|
86,713
|
|
|
90,335
|
|
|
Loan and guaranty servicing revenue
|
40,738
|
|
|
42,151
|
|
|
38,088
|
|
|
37,607
|
|
|
Tuition payment processing and campus commerce revenue
|
17,382
|
|
|
12,795
|
|
|
14,527
|
|
|
15,120
|
|
|
Enrollment services revenue
|
33,271
|
|
|
35,403
|
|
|
36,439
|
|
|
34,784
|
|
|
Other income
|
7,260
|
|
|
8,496
|
|
|
9,432
|
|
|
6,122
|
|
|
Gain on sale of loans and debt repurchases, net
|
10,177
|
|
|
8,759
|
|
|
9,885
|
|
|
49,810
|
|
|
Derivative market value and foreign currency adjustments and derivative settlements, net
|
1,682
|
|
|
(10,608
|
)
|
|
(35,391
|
)
|
|
33,640
|
|
|
Salaries and benefits
|
(40,644
|
)
|
|
(40,962
|
)
|
|
(41,085
|
)
|
|
(43,320
|
)
|
|
Cost to provide enrollment services
|
(22,025
|
)
|
|
(24,111
|
)
|
|
(23,709
|
)
|
|
(21,802
|
)
|
|
Depreciation and amortization
|
(10,783
|
)
|
|
(9,728
|
)
|
|
(9,025
|
)
|
|
(8,908
|
)
|
|
Impairment expense
|
—
|
|
|
—
|
|
|
—
|
|
|
(26,599
|
)
|
|
Restructure expense
|
(1,197
|
)
|
|
(72
|
)
|
|
(4,751
|
)
|
|
—
|
|
|
Litigation settlement
|
—
|
|
|
—
|
|
|
(55,000
|
)
|
|
—
|
|
|
Operating expenses - other
|
(29,055
|
)
|
|
(33,348
|
)
|
|
(26,717
|
)
|
|
(30,645
|
)
|
|
Income tax (expense) benefit
|
(32,593
|
)
|
|
(29,996
|
)
|
|
226
|
|
|
(51,057
|
)
|
|
Net income (loss)
|
$
|
54,322
|
|
|
49,993
|
|
|
(368
|
)
|
|
85,087
|
|
Earnings (loss) per common share - basic
|
$
|
1.09
|
|
|
1.00
|
|
|
(0.01
|
)
|
|
1.76
|
|
Earnings (loss) per common share - dilutive
|
$
|
1.08
|
|
|
0.99
|
|
|
(0.01
|
)
|
|
1.75
|
|
Statements of Income
|
|||||||||
(Parent Company Only)
|
|||||||||
Years ended December 31, 2011, 2010, and 2009
|
|||||||||
|
2011
|
|
2010
|
|
2009
|
||||
Operating revenues
|
$
|
4,304
|
|
|
31,846
|
|
|
30,892
|
|
Operating expenses
|
6,634
|
|
|
5,839
|
|
|
4,428
|
|
|
Net operating (loss) income
|
(2,330
|
)
|
|
26,007
|
|
|
26,464
|
|
|
Net interest income
|
2,970
|
|
|
5,779
|
|
|
4,680
|
|
|
Gain on purchase of debt
|
7,255
|
|
|
26,129
|
|
|
26,137
|
|
|
Derivative market value and foreign currency adjustments and derivative settlements, net
|
(55,911
|
)
|
|
(21,415
|
)
|
|
34,901
|
|
|
Equity in earnings of subsidiaries
|
256,299
|
|
|
188,738
|
|
|
101,373
|
|
|
Income tax expense
|
(3,948
|
)
|
|
(36,204
|
)
|
|
(54,430
|
)
|
|
Net income
|
$
|
204,335
|
|
|
189,034
|
|
|
139,125
|
|
Statements of Cash Flows
|
|||||||||
(Parent Company Only)
|
|||||||||
Years ended December 31, 2011, 2010, and 2009
|
|||||||||
|
2011
|
|
2010
|
|
2009
|
||||
Net income
|
$
|
204,335
|
|
|
189,034
|
|
|
139,125
|
|
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
|
|
|
|
|
|
||||
Depreciation and amortization
|
423
|
|
|
723
|
|
|
1,264
|
|
|
Derivative market value adjustment
|
36,226
|
|
|
2,077
|
|
|
(4,207
|
)
|
|
Proceeds from termination of derivative instruments
|
13,607
|
|
|
12,783
|
|
|
3,870
|
|
|
Payments to terminate derivative instruments
|
(10,242
|
)
|
|
(763
|
)
|
|
(15,069
|
)
|
|
Equity in earnings of subsidiaries
|
(256,299
|
)
|
|
(188,738
|
)
|
|
(101,373
|
)
|
|
Gain on purchase of debt
|
(7,255
|
)
|
|
(26,129
|
)
|
|
(26,137
|
)
|
|
Purchase of subsidiary debt, net
|
108,334
|
|
|
3,055
|
|
|
(183,905
|
)
|
|
Non-cash compensation expense
|
2,029
|
|
|
2,280
|
|
|
2,644
|
|
|
Change in investments - trading securities, net
|
5,767
|
|
|
(43,236
|
)
|
|
3,876
|
|
|
Decrease in other assets
|
341,412
|
|
|
361,020
|
|
|
310,328
|
|
|
Decrease in accrued interest payable
|
(3,218
|
)
|
|
(1,084
|
)
|
|
(903
|
)
|
|
Increase (decrease) in other liabilities
|
17,344
|
|
|
4,922
|
|
|
(47,397
|
)
|
|
Net cash provided by operating activities
|
452,463
|
|
|
315,944
|
|
|
82,116
|
|
|
Cash flows from investing activities, net of business acquisitions:
|
|
|
|
|
|
||||
(Increase) decrease in restricted cash
|
(3,083
|
)
|
|
11,313
|
|
|
66,769
|
|
|
Capital contributions to/from subsidiary, net
|
—
|
|
|
—
|
|
|
28,168
|
|
|
Business acquisition - contingent consideration
|
(5,893
|
)
|
|
—
|
|
|
—
|
|
|
Net cash (used in) provided by investing activities
|
(8,976
|
)
|
|
11,313
|
|
|
94,937
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
||||
Payments on notes payable
|
(440,913
|
)
|
|
(317,081
|
)
|
|
(183,743
|
)
|
|
Payments on notes payable due to a related party
|
(107,050
|
)
|
|
(111,675
|
)
|
|
—
|
|
|
Proceeds from issuance of notes payable due to a related party
|
—
|
|
|
218,725
|
|
|
—
|
|
|
Dividends paid
|
(17,763
|
)
|
|
(34,131
|
)
|
|
(3,492
|
)
|
|
Proceeds from issuance of common stock
|
512
|
|
|
528
|
|
|
449
|
|
|
Repurchases of common stock
|
(27,134
|
)
|
|
(39,805
|
)
|
|
(430
|
)
|
|
Payments received on employee stock notes receivable
|
30
|
|
|
279
|
|
|
101
|
|
|
Net cash used in financing activities
|
(592,318
|
)
|
|
(283,160
|
)
|
|
(187,115
|
)
|
|
Net (decrease) increase in cash and cash equivalents
|
(148,831
|
)
|
|
44,097
|
|
|
(10,062
|
)
|
|
Cash and cash equivalents, beginning of year
|
164,429
|
|
|
120,332
|
|
|
130,394
|
|
|
Cash and cash equivalents, end of year
|
$
|
15,598
|
|
|
164,429
|
|
|
120,332
|
|
•
|
had been accepted for enrollment or was enrolled in good standing at an eligible institution of higher education;
|
•
|
was carrying or planning to carry at least one-half the normal full-time workload, as determined by the institution, for the course of study the student was pursuing;
|
•
|
was not in default on any federal education loans;
|
•
|
had not committed a crime involving fraud in obtaining funds under the Higher Education Act which funds had not been fully repaid; and
|
•
|
met other applicable eligibility requirements.
|
•
|
Subsidized Stafford Loans
|
•
|
Unsubsidized Stafford Loans
|
•
|
PLUS Loans
|
•
|
Consolidation Loans
|
•
|
Original fixed interest rate of 8% for the first 48 months of repayment. Beginning on the first day of the 49
th
month of repayment, the interest rate increased to a fixed rate of 10% thereafter. Loans in this category were subject to excess interest rebates and have been converted to a variable interest rate based on the bond equivalent rate of the 91-day Treasury bill auctioned at the final auction before the preceding June 1, plus 3.25%. The variable interest rate is adjusted annually on July 1. The maximum interest rate for loans in this category is 10%.
|
•
|
When the borrower is in school, in grace, or in an authorized period of deferment, the applicable interest rate is variable and is based on the bond equivalent rate of the 91-day Treasury bill auctioned at the final auction before the preceding June 1, plus 2.5%. The variable interest rate is adjusted annually on July 1. The maximum interest rate is 8.25%.
|
•
|
When the borrower is in repayment or in a period of forbearance, the applicable interest rate is variable and is based on the bond equivalent rate of the 91-day Treasury bill auctioned at the final auction before the preceding June 1, plus 3.1%. The variable interest rate is adjusted annually on July 1. The maximum interest rate is 8.25%.
|
•
|
When the borrower is in school, in grace, or in an authorized period of deferment, the applicable interest rate is variable and is based on the bond equivalent rate of the 91-day Treasury bill auctioned at the final auction before the preceding June 1, plus 1.7%. The variable interest rate is adjusted annually on July 1. The maximum interest rate is 8.25%.
|
•
|
When the borrower is in repayment or in a period of forbearance, the applicable interest rate is variable and is based on the bond equivalent rate of the 91-day Treasury bill auctioned at the final auction before the preceding June 1, plus 2.3%. The variable interest rate is adjusted annually on July 1. The maximum interest rate is 8.25%.
|
•
|
July 1, 2008 and before July 1, 2009, the applicable interest rate is fixed at 6.00%,
|
•
|
July 1, 2009 and before July 1, 2010, the applicable interest rate is fixed at 5.60%.
|
•
|
Beginning July 1, 2001, the applicable interest rate is variable and is based on the weekly average one-year constant maturity Treasury yield for the last calendar week ending on or before June 26 preceding July 1 of each year, plus 3.1%. The variable interest rate is adjusted annually on July 1. The maximum interest rate is 11%. Prior to July 1, 2001, SLS Loans in this category had interest rates which were based on the 52-week Treasury bill auctioned at the final auction held prior to the preceding June 1, plus 3.1%. The annual (July 1) variable interest rate adjustment was applicable prior to July 1, 2001, as was the maximum interest rate of 11%.
|
•
|
have outstanding indebtedness on student loans made under the Federal Family Education Loan Program and/or certain other federal student loan programs; and
|
•
|
be in repayment status or in a grace period on loans to be consolidated.
|
•
|
9%, or
|
•
|
The weighted average of the interest rates on the loans consolidated, rounded to the nearest whole percent.
|
•
|
For the portion of the Consolidation Loan which is comprised of FFELP, Direct, FISL, Perkins, HPSL, or NSL loans, the variable interest rate is based on the bond equivalent rate of the 91-day Treasury bills auctioned at the final auction before the preceding June 1, plus 3.1%. The variable interest rate for this portion of the Consolidation Loan is adjusted annually on July 1. The maximum interest rate for this portion of the Consolidation Loan is 8.25%.
|
•
|
For the portion of the Consolidation Loan which is attributable to HEAL Loans (if applicable), the variable interest rate is based on the average of the bond equivalent rates of the 91-day Treasury bills auctioned for the quarter ending June 30, plus 3.0%. The variable interest rate for this portion of the Consolidation Loan is adjusted annually on July 1. There is no maximum interest rate for the portion of a Consolidation Loan that is represented by HEAL Loans.
|
•
|
For the portion of the Consolidation Loan which is comprised of FFELP, Direct, FISL, Perkins, HPSL, or NSL loans, the applicable interest rate is fixed and is based on the weighted average of the interest rates on the non-HEAL loans being consolidated, rounded up to the nearest one-eighth of one percent. The maximum interest rate for this portion of the Consolidation Loan is 8.25%.
|
•
|
For the portion of the Consolidation Loan which is attributable to HEAL Loans (if applicable), the applicable interest rate is variable and is based on the average of the bond equivalent rates of the 91-day Treasury bills auctioned for the quarter ending June 30, plus 3.0%. The variable interest rate for this portion of the Consolidation Loan is adjusted annually on July 1. There is no maximum interest rate for the portion of the Consolidation Loan that is represented by HEAL Loans.
|
•
|
during a period not exceeding three years while the borrower is a member of the Armed Forces, an officer in the Commissioned Corps of the Public Health Service or, with respect to a borrower who first obtained a student loan
|
•
|
during a period not exceeding three years while the borrower is a volunteer under the Peace Corps Act;
|
•
|
during a period not exceeding three years while the borrower is a full-time paid volunteer under the Domestic Volunteer Act of 1973;
|
•
|
during a period not exceeding three years while the borrower is a full-time volunteer in service which the Secretary of Education has determined is comparable to service in the Peace Corp or under the Domestic Volunteer Act of 1970 with an organization which is exempt from taxation under Section 501(c)(3) of the Internal Revenue Code;
|
•
|
during a period not exceeding two years while the borrower is serving an internship necessary to receive professional recognition required to begin professional practice or service, or a qualified internship or residency program;
|
•
|
during a period not exceeding three years while the borrower is temporarily totally disabled, as established by sworn affidavit of a qualified physician, or while the borrower is unable to secure employment because of caring for a dependent who is so disabled;
|
•
|
during a period not exceeding two years while the borrower is seeking and unable to find full-time employment;
|
•
|
during any period that the borrower is pursuing a full-time course of study at an eligible institution (or, with respect to a borrower who first obtained a student loan disbursed on or after July 1, 1987, or a student loan for a period of enrollment beginning on or after July 1, 1987, is pursuing at least a half-time course of study);
|
•
|
during any period that the borrower is pursuing a course of study in a graduate fellowship program;
|
•
|
during any period the borrower is receiving rehabilitation training services for qualified individuals, as defined by the Secretary of Education;
|
•
|
during a period not exceeding six months while the borrower is on parental leave; and
|
•
|
only with respect to a borrower who first obtained a student loan disbursed on or after July 1, 1987, or a student loan for a period of enrollment beginning on or after July 1, 1987, during a period not exceeding three years while the borrower is a full-time teacher in a public or nonprofit private elementary or secondary school in a “teacher shortage area” (as prescribed by the Secretary of Education), and during a period not exceeding one year for mothers, with preschool age children, who are entering or re-entering the work force and who are paid at a rate of no more than $1 per hour more than the federal minimum wage.
|
•
|
during any period that the borrower is pursuing at least a half-time course of study at an eligible institution;
|
•
|
during any period that the borrower is pursuing a course of study in a graduate fellowship program;
|
•
|
during any period the borrower is receiving rehabilitation training services for qualified individuals, as defined by the Secretary of Education;
|
•
|
during a period not exceeding three years while the borrower is seeking and unable to find full-time employment; and
|
•
|
during a period not exceeding three years for any reason which has caused or will cause the borrower economic hardship. Economic hardship includes working full time and earning an amount that does not exceed the greater of the federal minimum wage or 150% of the poverty line applicable to a borrower's family size and state of residence. Additional categories of economic hardship are based on the receipt of payments from a state or federal public assistance program, service in the Peace Corps, or until July 1, 2009, the relationship between a borrower's educational debt burden and his or her income.
|
•
|
is a National Guard member, Armed Forces reserves member, or retired member of the Armed Forces;
|
•
|
is called or ordered to active duty; and
|
•
|
is enrolled at the time of, or was enrolled within six months prior to, the activation in a program at an eligible institution.
|
•
|
A parent PLUS borrower, upon request, may defer the repayment of the loan during any period during which the student for whom the loan was borrowed is enrolled at least half time. Also upon request, the borrower can defer the loan for the six-month period immediately following the date on which the student for whom the loan was borrowed ceases to be enrolled at least half time, or if the parent borrower is also a student, the date after he or she ceases to be enrolled at least half time.
|
•
|
A graduate or professional student PLUS borrower may defer the loan for the six-month period immediately following the date on which he or she ceases to be enrolled at least half time. This option does not require a request and may be granted each time the borrower ceases to be enrolled at least half time.
|
•
|
1.5% with respect to loans for which the first disbursement was made on or after July 1, 2007, and before July 1, 2008;
|
•
|
1.0% with respect to loans for which the first disbursement was made on or after July 1, 2008, and before July 1, 2009; and
|
•
|
0.5% with respect to loans for which the first disbursement was made on or after July 1, 2009, and before July 1, 2010.
|
Date of Loans
|
Annualized SAP Rate
|
On or after October 1, 1981
|
T-Bill Rate less Applicable Interest Rate + 3.5%
|
On or after November 16, 1986
|
T-Bill Rate less Applicable Interest Rate + 3.25%
|
On or after October 1, 1992
|
T-Bill Rate less Applicable Interest Rate + 3.1%
|
On or after July 1, 1995
|
T-Bill Rate less Applicable Interest Rate + 3.1%
(1)
|
On or after July 1, 1998
|
T-Bill Rate less Applicable Interest Rate + 2.8%
(2)
|
On or after January 1, 2000
|
3 Month Commercial Paper Rate less Applicable Interest Rate + 2.34%
(3)(6)
|
On or after October 1, 2007 and held by a Department of Education certified not-for-profit holder or Eligible Lender Trustee holding on behalf of a Department of Education certified not-for-profit entity
|
3 Month Commercial Paper Rate less Applicable Interest Rate + 1.94%
(4)(6)
|
All other loans on or after October 1, 2007
|
3 Month Commercial Paper Rate less Applicable Interest Rate + 1.79%
(5)(6)
|
•
|
the applicable interest rate minus the special allowance support level for the loan, multiplied by
|
•
|
the average daily principal balance of the loan during the quarter, divided by
|
•
|
four.
|
•
|
originated or acquired with funds obtained from the refunding of tax-exempt obligations issued prior to October 1, 1993, or
|
•
|
originated or acquired with funds obtained from collections on other loans made or purchased with funds obtained from tax-exempt obligations initially issued prior to October 1, 1993.
|
|
Name
|
Organized in
|
Relationship to Nelnet Inc.
|
Percentage Ownership
|
1
|
National Education Loan Network, Inc.
|
Nevada
|
Direct Subsidiary
|
100%
|
2
|
Nelnet Capital LLC
|
Nebraska
|
Direct Subsidiary
|
100%
|
3
|
Nelnet Guarantor Solutions, LLC (formerly Nelnet Guarantee Services LLC; formerly GuaranTec LLP)
|
Florida
|
Indirect Subsidiary
|
100%
|
4
|
National Higher Education Loan Program, Inc.
|
Nebraska
|
Indirect Subsidiary
|
100%
|
5
|
5280 Solutions LLC (f/k/a Nelnet Technology Services LLC) (d/b/a Idaho Financial Associates, Charter Account Systems and 5280 Solutions)
|
Colorado
|
Indirect Subsidiary
|
100%
|
6
|
FirstMark Services, LLC
|
Colorado
|
Indirect Subsidiary
|
100%
|
7
|
Health Education Solutions, Inc. (f/k/a ClassCredit, Inc.)
|
Florida
|
Indirect Subsidiary
|
100%
|
8
|
EFS Finance Co., LLC
|
Nebraska
|
Indirect Subsidiary
|
100%
|
9
|
Nelnet Management Corporation-1 (formerly Nelnet Student Loan Warehouse Corporation – 1)
|
Nevada
|
Indirect Subsidiary
|
100%
|
10
|
Nelnet Student Loan Funding Management Corporation
|
Nevada
|
Indirect Subsidiary
|
100%
|
11
|
Nelnet Student Loan Funding, LLC
|
Delaware
|
Indirect Subsidiary
|
100%
|
12
|
NHELP-I, LLC
|
Delaware
|
Indirect Subsidiary
|
100%
|
13
|
Nelnet Education Loan Funding, Inc. (f/k/a NEBHELP, INC.)
|
Nebraska
|
Indirect Subsidiary
|
100%
|
14
|
Nelnet Canada, Inc.
|
Canada
|
Indirect Subsidiary
|
100%
|
15
|
Nelnet Business Solutions, Inc. (f/k/a FACTS Management Co.) (dba FACTS Management and infiNET Integrated Solutions)
|
Nebraska
|
Indirect Subsidiary
|
100%
|
16
|
Nelnet Asset Management, Inc. (f/k/a LoanSTAR Funding Group, Inc.)
|
Texas
|
Indirect Subsidiary
|
100%
|
17
|
Nelnet Academic Services, LLC (f/k/a Nelnet Mentor, LLC)
|
Nebraska
|
Direct Subsidiary
|
100%
|
18
|
Loanstar Assets GP, LLC
|
Delaware
|
Indirect Subsidiary
|
100%
|
19
|
Loanstar Assets LP, LLC
|
Delaware
|
Indirect Subsidiary
|
100%
|
20
|
Loanstar Assets Partners, LP
|
Delaware
|
Indirect Subsidiary
|
100%
|
21
|
CUnet, LLC
|
Delaware
|
Indirect Subsidiary
|
100%
|
22
|
Peterson’s Nelnet, LLC (formerly NELN Acquisition, LLC)
|
Nebraska
|
Indirect Subsidiary
|
100%
|
23
|
M & P Building, LLC
|
Nebraska
|
Direct/Indirect
|
100%
|
24
|
First National Life Insurance Company of the USA
|
Nebraska
|
Indirect Subsidiary
|
100%
|
25
|
Unilink USA, LLC
|
Nebraska
|
Indirect Subsidiary
|
50%
|
26
|
Unilink Data Systems Pty Ltd
|
Australia
|
Indirect Subsidiary
|
50%
|
27
|
Nelnet Servicing, LLC
|
Nebraska
|
Indirect Subsidiary
|
100%
|
28
|
Nelnet Diversified Solutions, LLC (formerly NLS Holding Company, LLC)
|
Nebraska
|
Direct Subsidiary
|
100%
|
29
|
Nelnet Enrollment Solutions, LLC
|
Nebraska
|
Indirect Subsidiary
|
100%
|
30
|
Nelnet Superconduit Funding, LLC
|
Delaware
|
Indirect Subsidiary
|
100%
|
31
|
Nelnet FFELP Student Loan Warehouse-I, LLC
|
Delaware
|
Indirect Subsidiary
|
100%
|
32
|
Merchant Preservation Services, LLC
|
Nebraska
|
Indirect Subsidiary
|
100%
|
1.
|
I have reviewed this annual report on Form 10-K of Nelnet, Inc. and subsidiaries (the “Company”);
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(a)
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Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
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Date:
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February 28, 2012
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/s/ MICHAEL S. DUNLAP
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Michael S. Dunlap
Chairman and Chief Executive Officer Principal Executive Officer |
1.
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I have reviewed the annual report on Form 10-K of Nelnet, Inc. and subsidiaries (the “Company”);
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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5.
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The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
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Date:
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February 28, 2012
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/s/ TERRY J. HEIMES
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|
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Terry J. Heimes
Chief Financial Officer
Principal Financial Officer and Principal Accounting Officer
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1.
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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2.
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date:
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February 28, 2012
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By:
/s/ MICHAEL S. DUNLAP
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|
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Name: Michael S. Dunlap
Title: Chairman and Chief Executive Officer
Principal Executive Officer
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|
|
|
|
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By:
/s/ TERRY J. HEIMES
|
|
|
Name: Terry J. Heimes
Title: Chief Financial Officer
Principal Financial Officer and Principal Accounting Officer
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